Project cost forecasting based on earned value management and Markov chain

Majid Damavandi (), Mahdieh Tavakoli () and Fariborz Jolai ()
Additional contact information
Majid Damavandi: University of Tehran
Mahdieh Tavakoli: University of Tehran
Fariborz Jolai: University of Tehran

Annals of Operations Research, 2025, vol. 351, issue 1, No 37, 1023-1048

Abstract: Abstract The most issue in project management is estimating the required budget for the project. Today, despite all the progress and relative achievement of forecasting models, project managers face many problems in financial and planning which sometimes lead to non-completion and abandonment. In recent years, several methods have been presented to estimate the cost of projects, but the uncertainty and ambiguities in projects are rarely taken into account while some studies emphasized that the actual cost of a project is independent of time and varies randomly under various uncertainties. Therefore, in this study, a framework for project cost forecasting considering the uncertainty is proposed using earned value management concepts combined with Markov chain concepts. In fact, it has been tried to use the concepts of the Markov chain to involve the uncertainty in project cost forecasting, so that the limitations of the traditional methods could be reduced. Finally, in order to compare the efficiency of the proposed method and traditional methods, the values obtained with the total final cost in a large project in a case study have been presented and evaluated. The results show that the use of this method on average estimates the final cost of the project more than 50% higher and more realistic than the estimate made by classical formulas.

Keywords: Earned value management (EVM); Project cost forecasting; Markov chain; Risk analysis (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
http://link.springer.com/10.1007/s10479-024-05889-7 Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spr:annopr:v:351:y:2025:i:1:d:10.1007_s10479-024-05889-7

Ordering information: This journal article can be ordered from
http://www.springer.com/journal/10479

DOI: 10.1007/s10479-024-05889-7

Access Statistics for this article

Annals of Operations Research is currently edited by Endre Boros

More articles in Annals of Operations Research from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().