Earned Value Management
(EVM)

Measuring the effectiveness of Program Management. Explanation of Earned Value Management. EVM.

What is Earned Value Management? Definition

Earned Value Management is an integrated program measurement and management technique that integrates

• technical performance requirements,
• resource planning with schedules,
• while taking risk into consideration.

In other words, EVM is a management technique that relates resource planning to schedules and to technical cost and schedule requirements. All work is planned, budgeted, and scheduled in time-phased ''planned value'' increments, constituting a cost and schedule measurement baseline.

Objectives of EVM

There are two major objectives of an Earned Value Management system:

1. to encourage contractors to use effective internal cost and schedule management control systems; and
2. to permit the customer to be able to rely on timely data produced by those systems for determining product-oriented contract status.

The major objectives of applying EVM to a contract are:

• To encourage contractors to use effective internal technical, cost and schedule management control systems, and
• To permit the customer to rely on timely data produced by those systems for better management insight.
• This data is in turn used for determining product-oriented contract status, and
• Projecting future performance based on trends to date.
• In addition, Earned Value Management allows better and more effective management decision making to minimize adverse impacts to the project.

Benefits of Earned Value Management

Earned Value Management provides an objective measurement of how much work has been accomplished on a project. Using the EVM process, the management team can readily compare how much work has actually been completed against the amount of work planned to be accomplished. All work is planned, budgeted, and scheduled in time-phased "planned value" increments, constituting a performance measurement baseline.

Earned Value Management Special Interest Group

Visit the Special Interest Group

Earned Value Management Forum

Raymond Erdman - USA

Use of control accounts in the WBS

"I am struggling with how to apply the use of 'control accounts' (cost accounts) in my WBS. I understand the concept but lack good examples of 'how' to do it - what do I call the CAs, how do I know in the WBS where they are needed, what do I roll up into them, etc. Sample project would be a video surveillance system design/build, which would include phases (roughly) such as operational reqs review, design, procurement, head-end build, site installation, training, testing, commissioning, production cutover, post-cutover support."

-1

Sunil Attarde - India

EVM in Fixed Price Software Projects

"We have been using Earned value based tracking for our Fixed Price Software Projects. It is very good method to plan future actions based on percentage completion - complex procedure, but need to be customized based on data collected - In software it becomes to subjective hence it may not give 100% accurate results - but provides directions to act to bring control back - to reduce OVERRUNS in most scenarios!!""

1

Georgia Olson - USA

When is an Asset over / under cost?

"Am wondering if anyone knows of any EVM ISO Procedure written with regard to what steps you take to know when an asset is over or under cost (and at what percentage?)"

3

Brigitte Jackson - USA

EVM

"We use EVM in project management of programs in a construction capacity, but not with buildings. Our company is utilities. I have a spreadsheet that performs the calculations that I can share if you like and if you are not using MS project do to EVM."

1

- Jordan

Definition of EVM

"According to PMI, in projects*, EVM is a management methodology for integrating scope, schedule and resources for objectively measuring project performance & progress against the baseline. The criteria were first released by the U.S. DoD in Dec. 1967. EVM is calculated by using formulas to determine variances related to time and cost for progress analysis purposes and forecasting. Some major EVM acronyms include: - AC: Actual Cost - PV: Planned Value - CV: Cost Variance - SV: Schedule Variance - CPI: Cost Performance Index - SPI: Schedule Performance Index - ETC: Estimate to Complete - EAC: Estimate at Completion - BAC: Budget at Completion - VAC: Variance at Completion *regardless of the project industry or field."

3

Mr. Akbar 123 - Dubai - UAE

EVM Implementation?

"I am interested to know about EVM implementation in a construction company. Projects like a group of buildings , towers or town houses, etc."

6

- Indonesia

Earned Value Management and Prompt Payment Clauses

"IF Earned Value Management is combined with "Prompt Payment" clauses in the contract (which it should) then it enhances a contractors cash flows and serves as an incentive. Contractors know that if they do the work, and do it correctly, in compliance with the "shall" clauses of the contract, that they will be paid promptly for their work. In none of the popular texts on Earned Value Management is this connection between doing the work on or ahead of schedule, correctly and in fulfillment of the contractual terms and conditions to prompt payment made clear."

0

Comment on this Page

Earned Value Management Education & Events

Compare EVM with: Cost-benefit Analysis  |  DCF  |  Net Present Value  |  Value Engineering  |  Gantt Chart

Return to Management Hub: Program & Project Management

More Management Methods, Models and Theory