EARNED VALUE FOR CONSTRUCTION SUBCONTRACTORS, SIMPLIFIED AND PRACTICAL.
Earned value isn't a government contract idea. It's the practice of measuring whether a job is spending money in proportion to the value it's producing. A job 60% complete that has spent 75% of the budget has earned $360K of value while spending $450K, which is $90K of overrun you can see today instead of at closeout. The simplified form takes physical percent complete times contract value and compares it to actual cost, so it runs on two numbers.
Most subcontractors track what they spend and never set it against how much work is standing in the field. That's why the overrun turns up at closeout, when there's nothing left to do about it. The comparison you want runs the other direction: take the physical completion the crew reports, multiply it by contract value, and put that against the cost in your closed books. If the cost side is bigger, the job is buying less production per dollar than the estimate assumed, and every remaining foot of work will carry the same premium until something changes.
WHAT IT MEANS.
Earned value is the practice of measuring project progress in dollars of value earned rather than dollars of cost spent.
Three figures drive the whole calculation. Planned value is what the completed work was supposed to cost. Earned value is the contract value of the work that's finished. Actual cost is what got spent producing that scope. Earned value above actual cost means the crew is producing more value per dollar than the estimate assumed, and actual cost above earned value means the reverse. The distance between planned value and earned value is where you stand on schedule.
Earned value is also the idea sitting underneath the WIP schedule, which is why the two always agree when both are built right. The earned to date column in the WIP is the earned value calculation with a different label on it. The overbilling or underbilling position is the comparison between billed to date and earned to date, and nothing more complicated than that.
WHY THE OVERRUN SURFACES LATE.
Spending gets tracked and production doesn't
A cost report tells you what left the bank. It doesn't tell you how much of the contract the crew has already put in place. Without both sides of that comparison, an overrun stays invisible until the job closes and the final numbers post, and by then the scope is built and the only thing left to argue over is a change order nobody documented.
Billing percent complete gets mistaken for physical percent complete
These are two different percentages and they rarely agree. Billing percent complete is what you've billed against contract value, while earned value percent complete is how much of the work the crew has physically installed. On a front loaded schedule of values, billing can read 40% while the job is 28% built, and that spread is the overbilling position in your WIP rather than a sign of a job running ahead.
The cost to complete gets priced off the estimate instead of current performance
Most cost to complete reports take the remaining scope and price it at the original estimate, which assumes without saying so that the crew will suddenly perform better than it has all job long. If the job is running at 0.88 cost efficiency, then $200K of remaining estimated cost will really cost $227K to finish. Pricing the remainder at the efficiency the job is producing right now gets you a finish number you can plan against.
WHAT IT LOOKS LIKE IN DOLLARS.
Physical percent complete times contract value equals dollars earned, and dollars earned gets compared to dollars spent. A job 65% complete on a $600K contract has earned $390,000 and has spent $430,000, so it's $40,000 over. With 35% of the scope still to build, that job has to recover the $40,000 and deliver the rest at estimated cost just to break even.
Divide earned value by actual cost and you get the efficiency the job is running at. A job that earned $390K while spending $443K is running at 0.88, which is 88 cents of value for every dollar spent. Apply 0.88 to the scope that's left and the overrun at completion becomes a calculation off current performance rather than a hopeful estimate.
THE FOUR STEPS, IN ORDER.
The percentage comes from the field, not from the cost report. You count units placed, phases finished, and milestones hit, then divide by total scope. A cost based percentage is circular, because it uses spending to measure production and then turns around and compares the answer to spending.
Multiply the physical percent complete by contract value and you have dollars earned to date. That single figure is what the whole comparison rests on. It takes about a minute once the field number is written down, which is why there's no good excuse for skipping it.
Actual cost comes out of the monthly close, not out of a running guess or a stack of unentered invoices. Set it against earned value and the difference is the cost performance of that job stated in dollars. Books that close every month are what make this comparison possible at all.
Take the efficiency the job is running at and apply it to the scope that's still to build. That turns a mid job overrun into a projected finish number instead of a fact you learn later. A finish number is the whole point, because it's the only form of this information you can still act on.
FLAT MONTHLY FEE. NO SURPRISES.
Three tiers, priced by your trailing twelve month revenue. Which one you're in depends on how much of the work you want off your desk. No hourly billing, no payroll, and no add-ons.
| Last 12 months revenue | Monthly fee |
|---|---|
| Up to $1M | $1,900 to $2,900 |
| $1M to $3.5M | $2,600 to $3,900 |
| $3.5M to $6.5M | $3,800 to $5,700 |
| $6.5M to $9.5M | $5,100 to $7,100 |
| $9.5M to $12.5M | $6,100 to $8,500 |
| $12.5M to $15.5M | $7,400 to $11,000 |
| $15.5M to $18.5M | $9,400 to $13,500 |
| $18.5M+ | Quoted individually |
Range reflects the three tiers below. Which one you're in depends on how much of the work you want off your desk. No payroll. No hidden line items.
You stop guessing.
You get the CFO work. Job costing built against the way you estimate, a 13 week cash forecast, monthly WIP, and a meeting every month that ends in decisions rather than a report.
Your bookkeeper keeps doing the books.
You stop touching the books.
Everything in Core, and we run the bookkeeping and the controllership as well. Nobody in your office is answering coding questions or chasing a reconciliation at month end.
We do the books. No payroll.
Every job shows its margin while it's still running.
Everything in Executive, plus the job costing and WIP platform set up, loaded with your cost codes, and managed for you every month. You never have to learn it.
We do the job costing.
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