Amogh N P
✦ In loving memory of Amogh N P — Architect · Designer · Visionary ✦
A multi-storey RCC building under construction with scaffolding and a tower crane — the live project the contract administers through bills, variations, time and cost control.
Unit IVProject Cost & Contract Management

Contract Administration & Cost Control

Bills, variations, EOT — and Earned Value Management.

≈ 45 min + studio task

From award to completion the administrator runs a recurring payment cycle — work is measured, the contractor submits a running-account (RA) bill, the Engineer certifies, the owner pays. Learn variations / change orders and their valuation, extension of time (EOT) and prolongation (EOT ≠ money), price escalation, retention and mobilisation advance, the defects-liability period and final account; and cost control via Earned Value Management — PV, EV, AC, the CPI and SPI indices, and EAC. Try the live earned-value calculator.

Learning objectives

By the end of this lesson, you will be able to — mapped to the course outcomes for Project Cost & Contract Management:

1
CO4 · Apply

Run the RA-bill payment cycle and value variations / change orders.

2
CO4 · Analyse

Distinguish EOT (time) from prolongation cost (money), and apply escalation/retention.

3
CO4 · Apply

Compute and interpret the EVM metrics — PV, EV, AC, CV, SV, CPI, SPI, EAC.

4
CO4 · Understand

Explain the defects-liability period and the final account.

Bills, variations, EOT

Administering the contract

The payment cycle is measure → bill → certify → pay; variations are valued by a rate hierarchy; and an EOT extends time and relieves LDs — but money follows only for compensable delay.[3, 4]

The payment cycle measure work RA / interim bill certify owner pays certification = the legal trigger for payment Timely certificates protect the contractor's cash flow — it funds the work ahead of being paid (the S-curve).
DiagramThe recurring payment cycle — measure work, RA bill, certify, owner pays, repeat

Measure → bill → certify → pay

Once live, the administrator runs a recurring cycle: work is executed → MEASURED (jointly, in the Measurement Book) → the contractor submits a RUNNING ACCOUNT (RA)/interim bill → the Engineer VALUES and CERTIFIES the amount due → the owner PAYS within the contractual period, less retention and recovery of advances. Certification is the legal TRIGGER for payment; timely certificates protect the contractor's cash flow (it funds work ahead of payment — recall the S-curve).[3, 4]

EOT extends TIME — not automatically MONEY original date + EOT relieves LDs excusable delay → EOT (time + relief from LDs) COMPENSABLE delay → + money (prolongation cost, separately proven) EOT does NOT automatically bring extra payment — money follows only for employer-caused (compensable) delay.
DiagramAn EOT extends the completion date and relieves liquidated damages, but money follows only for compensable delay
PV, EV, AC, CPI, SPI

Cost control — Earned Value

EVM integrates scope, time and cost: PV/EV/AC give CV, SV, CPI, SPI and EAC — and spend (AC) is not progress (EV).[1, 2]

Earned Value — PV, EV, AC time → (data date dashed) PV EV AC CV = EV − AC SV = EV − PV CPI = EV/AC SPI = EV/PV >1 good · <1 warning Spend (AC) is not progress (EV) — you can spend on time yet earn less value. EVM exposes exactly that.
DiagramEarned value management curves — planned value, earned value and actual cost — with cost and schedule variance

PV, EV, AC

Earned Value Management (EVM) integrates scope, time and cost into one measure. PV (Planned Value / BCWS) = budgeted cost of work PLANNED to date. EV (Earned Value / BCWP) = budgeted cost of work ACTUALLY DONE to date. AC (Actual Cost / ACWP) = money ACTUALLY SPENT on that work. MISCONCEPTION→correct: 'if I've spent the budgeted amount on schedule I'm fine' — spending is AC, not progress; you can spend on time yet EARN far less value (low EV). EVM exposes exactly that.[1]

Interactive

Compute earned value

Move the PV, EV, AC and BAC sliders — the calculator computes CV, SV, CPI, SPI and the forecast EAC, with an on/over-budget and ahead/behind-schedule verdict.

Earned-value calculator · move the sliders

CV = EV − AC-10
SV = EV − PV-15
CPI = EV / AC0.89
SPI = EV / PV0.85
over budgetbehind schedule

EAC = BAC / CPI = ₹558.82 — the forecast out-turn if current cost performance continues.

CPI/SPI above 1 is good (under budget / ahead); below 1 is the warning. Spend (AC) is not progress (EV).

CPI vs SPI

At a glance

AspectCPI (cost)SPI (schedule)
FormulaCPI = EV / ACSPI = EV / PV
MeasuresCPI: cost efficiencySPI: schedule / progress efficiency
Value < 1 meansCPI: over budgetSPI: behind schedule
Value > 1 meansCPI: under budgetSPI: ahead of schedule
Variance partnerCV = EV − ACSV = EV − PV
Vocabulary

Key terms

RA bill

Running-account (interim) bill claiming payment for measured work to date.

Variation

A formally instructed change to scope/quality/quantity, valued under the variation clause.

Extension of Time (EOT)

A revised completion date for excusable delay, relieving liquidated damages.

Retention

Money withheld from payments as performance/defects security, released in stages.

Earned Value (EV)

Budgeted cost of work actually performed — progress expressed in money.

EAC

Estimate At Completion — the forecast total project cost at finish.

Apply it

Studio task

Given a project with PV ₹100L, EV ₹85L, AC ₹95L and BAC ₹500L, compute CV, SV, CPI, SPI and EAC, and state in one sentence whether it is over/under budget and ahead/behind schedule. Then explain, with an example, why an EOT for employer-caused delay does not automatically bring extra payment — and what would.

Check your understanding

Self-assessment

1. A project shows CPI = 0.9, SPI = 1.05. The project is —

2. An EOT for employer-caused delay entitles the contractor to —

3. Earned Value (EV) equals —

In a nutshell

Recap

The payment cycle is measure → RA bill → certify → pay; certification triggers the owner's obligation.
Variations are valued BOQ → pro-rata → fair rate and must be in writing; EOT extends time and relieves LDs.
EOT ≠ money — prolongation cost is payable only for compensable (employer-caused) delay.
Retention and mobilisation advance are security/loan mechanisms; the DLP and final account close the contract.
EVM: PV/EV/AC give CV, SV, CPI, SPI and EAC — CPI/SPI above 1 is good; spend (AC) is not progress (EV).
The evidence

References & further reading

  1. [1]PMI, Practice Standard for Earned Value Management & PMBOK Guide — EVM definitions, formulae, indices.
  2. [2]K.K. Chitkara, Construction Project Management (McGraw Hill, India) — EVM, S-curve, monitoring.
  3. [3]CPWD Works Manual & GCC — RA bills, MB measurement, retention, mobilisation advance, escalation formula.
  4. [4]B.S. Patil, Building and Engineering Contracts — variations, EOT, certification, final account (Indian law).
  5. [5]FIDIC Red/Yellow Book (2017) cl. 8 (time/EOT), cl. 13 (variations), cl. 14 (payment).

Further reading

  • PMI — Practice Standard for Earned Value Management.
  • K.K. Chitkara — Construction Project Management.
  • B.S. Patil — Building and Engineering Contracts.

Sources gathered and fact-checked June 2026. Published values vary by source, sample and method — treat as indicative and confirm against the cited standard before structural use.