Considering everything that impacts the construction industry today, leveraging a Critical Path Method (CPM) schedule can help you keep an eye out for any challenges that may arise. Utilizing a CPM schedule offers project teams an abundance of data that, if leveraged correctly, is critical for effectively managing contractual deadlines.
Now more than ever, data has become critical for industry profitability and performance to be at an acceptable level. All of the data within construction schedules have the potential to give insight into what is driving project deliverables. Having an accurate gauge for deliverables may seem impossible. Yet, it is achievable through data-driven schedule forecasting. This article examines schedule forecasting so project teams can efficiently manage towards an end date.
What You Need Before You Begin Forecasting:
Before explaining forecasting, it is important to note other project controls that must be available to you before you try predicting end dates. Over the past couple of months, SmartPM has expanded its knowledge base surrounding the importance of project controls within commercial construction. Before you even begin analyzing other project controls (such as compression, earned value analysis (EVA), or studying critical path delay and recovery), you need to have a high-quality CPM schedule.
Having a high-quality schedule to work off of ensures that all of the data pulled is accurate, therefore allowing project controls to be utilized to their fullest potential. On the other hand, an inaccurate CPM schedule detracts you from realizing the areas in which you need to place your resources the most, which is critical for hitting target KPIs. Once you have a high-quality schedule, you can begin schedule forecasting for accurate project predictions.
What is Schedule Forecasting?
Schedule forecasts are predictions of project conditions in the future based on information available at the time of schedule creation. How does forecasting accurately predict future project conditions? By utilizing historical performance data to determine the average production rate. The production rate can be measured for the overall project or at individual trades. Then, you can use this rate to predict a project’s future outcome if productivity remains the same. It should be noted that the more granular your data, the more reliable your forecasting will be.
As your project progress and the schedule is updated, the forecast can also be updated, taking into account any changes in productivity. As the forecast is updated, it becomes a critical component in risk mitigation. In fact, adjusting the schedule based on historical performance and not over-optimistic guessing gives the best gauge for when a project will finish and what is driving its completion.
Schedule forecasting can be done in many different ways. However, at SmartPM, forecasting is done automatically by utilizing Earned Value Analysis (EVA) metrics and extrapolating that data on a future planned curve based on historical performance.
The Earned Value Metrics You Need for Forecasting
Don’t worry. There is no need to conduct a holistic earned value analysis to forecast. You actually only need to figure out two earned value metrics, the planned value (PV) and earned value (EV):
- Planned Value (PV): the planned progress scheduled for completion at a specific point in time, represented as a percentage of the completion of the project (100%).
- Earned Value (EV)- the progress actually achieved at a specific point in time, represented as a percentage of the overall completion of a project (100%).
By looking at earned value over time, you can extract a Schedule Performance Index (SPI) that acts as an indicator of project performance to date and can be used to predict the outcome of the project if performance stays the same.
What is the Schedule Performance Index (SPI)?
Using an earned value approach, SPI compares planned progress with earned progress to determine how closely you are following your baseline plan. A project’s SPI can be found by dividing its earned value by its planned value (EV/PV).
From there, the SPI’s ratio tells you where you are in terms of progress. For example, let’s say you conducted this analysis when you were 72% done with your project. However, you had planned to be 85% done. From there, the equation EV/PV (72/85) gives you an SPI of 0.847.
An SPI of 0.847 means that you are achieving 84.7% productivity and are behind schedule. In other words, for every ten days of work, you only earn 8.47 days of your planned work. So, if an activity has an original duration of 10-days, it will actually take you roughly 11.8 days to complete as your production rate is slower than you had planned.
When and How You Forecast Using SPI
Based on our experience analyzing thousands of projects, the Schedule Performance Index becomes a reliable representation of performance midway through the project because, at this point, there is enough data to assume that any anomalies have minimal impact on this performance metric.
Why should you wait until a project is halfway through to begin forecasting? Because at different phases of a project you have very different activities with very different parties responsible for the work that is being done. It would not be fair/wise to use delays during the pre-construction phase to adjust the construction phase as the problems you encounter would be different.
Halfway through the job, or, in this case, 72% through the job, you can forecast how you will perform in the future by looking at the entire schedule up to date, using historical information as a way to predict the future. As far as this example is concerned, by looking at the SPI of approximately 0.847, whatever the estimated duration remaining is will be about 18% longer because, historically, you are consistently underperforming by about 18%.
As depicted on the graph above, the project’s progress curve is extrapolated by using the SPI to adjust the scheduled completion, shown by the yellow line. The yellow line is the schedule forecast, predicting the project will be 100% completed about four months later than what the scheduled completion date is telling you and six months later than the baseline plan indicated. Knowing this allows you to know that you must increase productivity, or your project will be delayed.
The Added Value of Schedule Forecasting
Forecasting gives companies an early warning sign for potential end date slippage. Knowing how much overrun you are potentially going to have opens lines of communication with all stakeholders, allowing for better outcomes for everyone through collaborative decision-making. Additionally, combining forecasting with other data-driven project control metrics throughout the entire duration of a project gives an unbiased gauge of when a project will actually finish.
As we conclude our series on project controls, it is important to note how automated project controls change the way the construction industry is run by leveling the playing field between companies of any size. Through analyzing CPM schedules, actual project performance factors driving the end date become visible, project delivery becomes optimized, and relationships improve, as does an organization’s profitability.
SmartPM’s cloud-based project controls platform offers high-level insight into your CPM schedule, allowing for better, faster decisions and greater visibility into what is really going on at the job site. Fill out the form below and see how we can forecast your schedule, gauge compression, study critical path delay and recovery, perform earned value analysis, and more.