Earned Value, a Supplier Delay, and an Unpriced Client Change
At the end of month 5 of a 10-month, USD 4.8 million machine-build and installation project, the control account reports PV = 2.40 M, EV = 2.00 M, and AC = 2.30 M. The critical path runs through imported gearboxes; the supplier has confirmed a three-week delay, and float on that path is zero. The client now requests an acoustic enclosure worth USD 45,000 and about two weeks of extra work, arguing it was implied by the noise specification. The project manager proposes to absorb both delays by authorizing 1.5× overtime in the machining and assembly work packages, which have 1.5 M of remaining budget and are already at CPI 0.86. The contract requires written change orders for scope and a 10% management reserve; the reserve is untouched.
1. Calculate CPI, SPI, EAC, and TCPI, and state what they do and do not tell you about the schedule.
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Calculations
- CPI = EV/AC = 2.00/2.30 = 0.87. CV = EV − AC = −0.30 M.
- SPI = EV/PV = 2.00/2.40 = 0.833. SV = −0.40 M.
- EAC = BAC/CPI = 4.8/0.87 ≈ 5.52 M, assuming current cost performance continues. VAC = BAC − EAC ≈ −0.72 M.
- TCPI to BAC = (BAC − EV)/(BAC − AC) = (4.8 − 2.0)/(4.8 − 2.3) = 2.8/2.5 = 1.12.
A TCPI of 1.12 means the remaining work must be delivered 12% more efficiently than the original plan, which is demanding when CPI is already 0.87.
Limits of the indices
SPI is cost-weighted, not time-based. It shows that 2.0 M of budgeted work has been earned against 2.4 M planned, but it does not identify which activities are late or whether they are on the critical path. A project can have SPI near 1.0 and still finish late if the critical path is delayed. Here the critical path has zero float and a confirmed three-week supplier delay, so the schedule forecast must come from the network, not from SPI alone. A rough duration forecast of 10/0.833 ≈ 12 months is a warning, not a commitment. The EAC also assumes the remaining work will behave like the past; if the overrun is concentrated in early, non-repetitive work, that assumption may be pessimistic or optimistic.
2. Evaluate the project manager's overtime proposal and the client's change request. What are the cost, schedule, and governance implications?
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Overtime proposal
Overtime at 1.5× on 1.5 M of remaining machining and assembly work could add up to 0.75 M in premium if all remaining hours were worked at the premium rate, before any productivity loss. Overtime commonly reduces productivity by 10–20% through fatigue, supervision gaps, and rework, so the real cost could exceed the premium and the schedule gain could be less than the hours suggest. More importantly, overtime only helps if those work packages are on the critical path. If the gearboxes are the constraint, accelerating machining and assembly builds work-in-progress that cannot be installed and does not recover the three weeks. Crashing non-critical work is a cost with no schedule benefit.
Change request
USD 45,000 is under 1% of BAC, but it is still a scope change. It needs a written change order with priced labour, materials, overhead and profit per the contract, plus a schedule impact of about two weeks. Work should not start before authorization; otherwise the contractor is exposed to a constructive-change claim or may fund client scope from its own margin. The management reserve is for unidentified risks, not for client-directed scope; using it here would hide the cost and weaken the change-control process.
Governance
Approval thresholds, change-control board review, and client sign-off must be followed. The 10% reserve should not be touched without the documented authority and a plan to replenish or re-baseline.
3. Recommend a course of action, including how to recover schedule and how to re-baseline.
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Recommendation
- Separate the two delays. The gearbox delay is a supplier issue; the enclosure is a client scope change. Treat them with separate owners, dates, and cost codes rather than blending them into one overtime decision.
- Expedite the gearboxes. Ask the supplier for a recovery plan, consider premium freight or a partial shipment, and verify the new date in writing. This is the only action that directly attacks the critical path.
- Re-sequence work. Use the three-week window to complete enclosure foundations, piping, and electrical work that does not depend on the gearboxes. This can recover part of the time without overtime.
- Use targeted overtime only on critical-path activities, with a productivity factor and daily tracking. Do not authorize blanket 1.5× overtime.
- Submit a written change order for the enclosure before starting it, with cost, schedule, and acceptance criteria. If the client disputes that it was implied, escalate through the contract mechanism rather than absorbing it silently.
- Re-baseline EAC and the schedule with the approved change and the supplier recovery date. Report CPI, SPI, and the critical-path forecast separately.
Governance and communication
Tell the client early about the gearbox delay and the schedule impact; hiding it until month 8 destroys credibility. Record decisions, approvals, and the basis of estimate. If the reserve is used, state the authority and the replenishment plan. The project manager's instinct to protect the date is understandable, but overtime cannot fix a supplier constraint and unpriced scope should not be funded from the project's margin.