Earned Value Management (EVM) is a valuable tool in planning and scheduling for several reasons:
- Performance Control: EVM helps control performance, especially for complex projects. It provides schedule and cost performance assessments of both the total project and its breakdown of structure elements.
- Problem Identification: EVM allows you to identify problem areas so that you can take the most effective corrective actions.
- Objective Measurement: EVM provides an objective indication of actual accomplishment. This assessment of actual accomplishment gives managers greater insight into both progress and potential risk areas.
- Forecasting: EVM can be used to assess both cost and schedule performance. It provides a method for evaluating the relative success of a project at a point in time and can forecast the likely future performance based on past performance.
- Integration: EVM is more than a metric. It is the combination of robust planning and integrated management system elements. For the benefits of EVM to be fully realized, thorough planning combined with the establishment of and disciplined maintenance of a baseline for performance measurement are needed.
- Improved Planning: To get the robust baseline required for EVM, customers often see improvements to their planning process, better-defined work scope, and a clearer view of who’s responsible for the work.
In summary, EVM helps you stay on budget and on time. It tracks the cost and schedule associated with the project by comparing the current state of a project against original plans and projections. This, in turn, helps you make crucial adjustments that make your projects more likely to be successful.
Key Components of EVM
- Planned Value (PV): Also known as the Budgeted Cost of Work Scheduled (BCWS), it represents the amount of the task that should have been completed according to the schedule.
- Earned Value (EV): Also known as the Budgeted Cost of Work Performed (BCWP), it represents the amount of work actually completed.
- Actual Cost (AC): Also known as the Actual Cost of Work Performed (ACWP), it represents the actual cost incurred for the work completed.
Performance Indicators
EVM uses these values to compute performance indicators that can forecast future performance trends. These are:
- Schedule Variance (SV): It’s calculated as
SV = EV - PV. A negative SV indicates the project is behind schedule. - Cost Variance (CV): It’s calculated as
CV = EV - AC. A negative CV indicates the project is over budget. - Schedule Performance Index (SPI): It’s calculated as
SPI = EV / PV. An SPI less than 1.0 indicates the project is behind schedule. - Cost Performance Index (CPI): It’s calculated as
CPI = EV / AC. A CPI less than 1.0 indicates the project is over budget.
EVM in Scheduling Tools
Project scheduling tools like Primavera P6 and Microsoft Project have built-in features to implement EVM. They allow project managers to input the planned value and actual cost, and they automatically calculate the earned value and the performance indicators.
In conclusion, EVM is a powerful methodology for integrating scope, schedule, and cost objectives, measuring project performance, and establishing a baseline for performance measurement and control. It provides a method for evaluating the relative success of a project at a point in time and can forecast the likely future performance based on past performance.