Investigating the influence of accrued expenses on the earned value analysis of a project

Economy and management of the enterprise

Project Earned value analysis (PEVA) is a project performance assessment tool considered to be one of the best-known methods to control and monitor project progress. The earned value analysis assesses the three main aspects of any project: cost, schedule, and scope, and can be used to identify early indications of project performance, enabling project managers not only to identify project progress, but also to control it and hence take corrective actions. The earned value concept allows cost managers to manage projects optimizing time and budget goals, and to identify when the project is behind or ahead of schedule, under- or over-budget, using performance indices and variance parameters. However, implementing PEVA is not without limitations, such as not taking late invoices or purchase orders into account, which results in inaccuracy of actual costs which can significantly affect the outcome and consequently provide an incorrect indication of project progress. This paper outlines the basic format of the earned value analysis, concisely explaining how earned value analysis can be implemented. Moreover, it explores challenges associated with PEVA implementation such as inaccuracy of actual costs, and how accrued costs can be used to tackle this challenge. It also aims to raise awareness regarding accrued expenses and how the tool can be used to address the issue of late invoices in order to help practitioners improve reliability when implementing the earned value analysis tool. In this paper, PEVA has been applied to a real construction project at Petroleum Marine Services Company (PMS), and the findings show that accrued costs enhance the reliability of PEVA.