What is Earned Value Management and Uses?

Earned Value Management (Hereinafter referred to “EVM” also) is a project management method that integrates scope, schedule and cost to assess how the project is performing against the project plan.

In other words, It is a method for measuring and assessing project performance (time and cost) by integrating

  • Planned work
  • Planned cost
  • Actual work and
  • Actual costs

Similarly, EVM is a comparison of Actual costs of work accomplished with the Budget costs of work accomplished. In other words, called Earned Value.

EVM is vital to have adequate means of obtaining information about the progress of a project against

  • its baseline and
  • the anticipated outcome of the project.

MEASURES OF EVM

EVM measures project cost performance by comparing the assigned cost of work accomplished against its actual cost.

Moreover, It also measures project schedule performance by comparing the assigned cost of work accomplished against the assigned cost of scheduled work that should have been completed.

By providing a uniform unit of measurement and a consistent methodology for reporting progress. Moreover, EVM provides an objective measure to assess cost and schedule project performance.

And, by integrating the scope of work with the budget and actual costs, a better picture of project progress can obtain.

Earned Value Management

Fig.1 – Budget cost vs Actual Cost

From the above figure,

At a particular point in time, the actual cost is compared against budget costs up to the current period and a Variance is calculated.

Traditionally, this variance has been used to determine whether the project is under budget or over budget.

Thus, comparing actuals to budget results in determining a spending variance, rather than a cost variance and does not provide a realistic picture of an overrun or underrun.

This is a result of the fact that actual costs of work accomplished should not be compared to planned costs of the work budget.

From the above figure, there is a possibility of two scenario’s

  • Could the project team be accomplishing the planner work but with more money?
  • Alternatively, could the team be ahead of schedule and, hence, have spent more than what was anticipated at the current analysis time (Time now)?

Earned Value Management is apparent that comparing the budget to the actual cost makes it very hard to determine a true picture of project progress.

USES

  1. Helps project managers in analyzing and reporting project performance.
  2. To find variances in a project like a cost, schedule
  3. Enables early problem identification and resolution.

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Also Read: Introduction to Project and Project Management

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