EVM is a good practice approach used for the planning, management and control of baseline project plan, and then the management of cost and schedule. Earned value management is a project management technique for measuring PMI Includes EVM into PMBOK Guide. 's EVM. Charles I. Budd, PMP, is a principal of Budd Management Systems in Atlanta, Georgia. He is certified as a system analyst by the Foundation for Administration .
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Request PDF on ResearchGate | On Jan 1, , Charles I. Budd and others published A Practical Guide to Earned Value Project Management. Introduction to Earned Value. Applying Earned PMI Practice Standard for Earned Value Management, By definition at end of project. Project Management Journal · Volume 41, Issue 2 A practical guide to earned value project management, second edition. Kenneth H. Rose.
What is Earned Value? The most comprehensive trend analysis technique is the Earned Value method. In a nutshell, Earned Value is an approach where you monitor the project plan, actual work, and work completed value to see if a project is on track. Earned Value shows how much of the budget and time should have been spent, considering the amount of work done so far. Here are five other definitions: Englert and Associates, Inc.
Contrary to popular assertions, EVM is overwhelmingly a planning tool. That's not to say it doesn't impact accounting and control; it does. Most definitions of EVM overlook this point.
For example, according to the book Earned Value Project Management by Quentin Fleming and Joel Koppelman, one popular definition of EVM is "an approach that integrates the technical scope of work, the schedules and the costs, allowing for the continuous measurement of integrated performance throughout the life cycle of the project.
Yet research by L. Marella has shown that EVM's greatest impact is defining the work to be accomplished. EVM's significant effect on planning is due to the way in which work is scoped and budgeted using a "bottom-up, detailed work breakdown structure WBS.
It's not surprising, then, that as a project's level of detail increases, the frequency of using EVM decreases, according to Kim.
EVM works best in collaborative organizations where teamwork and frequent communications are present. Because EVM involves routinely collecting, synthesizing, analyzing and disseminating project information from the bottom up, the methodology requires effective coordination and communication throughout the organization in order to produce timely EVM data.
This is less an issue on smaller projects, where members of the project team are often close and under one organizational umbrella. In larger projects, however, it can be a significant challenge.
Effective collaboration and communication links are critical when project teams are cross-functional, and many times cross-company, such that activities and personnel are often physically and organizationally separated. Project schedulers, job cost specialists, engineers, functional managers, planning and control specialists, and other key project personnel must be in frequent and close contact throughout the project's life.
If an organization's separate entities don't work well together, it may not be ready for EVM. EVM complement other project management techniques.
While practitioners who use EVM overwhelmingly endorse it, it's but one tool among many for project managers and isn't meant to be used in isolation.
One technique commonly used with EVM is the critical-path method. EVM's WBS activities can be readily converted into a project network whereby the critical path is determined. The two techniques go hand in hand. Other techniques that can be used alongside EVM include Gantt and milestone charts, line of balance, standard delay impact analysis techniques, work authorization methods, quality control techniques and methods for determining management reserve amounts.
Using commonly accepted techniques in conjunction with EVM enhances the benefit of all. EVM metrics are reliable. The most conspicuous attribute of EVM is its unique metrics for evaluating and forecasting project performance.
EVM metrics have been a topic in project management literature for years.
The metrics combine three dimensions of a project's performance - scope, schedule and cost - into unified performance measures, which differentiates them from other performance measurement methods and proves them to be realistic and accurate. Air Force in the early s showed that a project's cumulative cost performance index at the 20 percent project completion mark doesn't change by more than 10 percent for the remainder of the project.
On one hand, a stable cost performance index might indicate that a project's management controls are working effectively. On the other hand, if a project is financially underperforming at the 20 percent mark, it generally won't improve with time, unless significant corrective measures are taken.
In either case, when developed and calculated properly, EVM's metrics can be relied upon to provide insight into a project's performance. Contract type doesn't influence EVM's benefit. The assertion that EVM is ideally suited for cost-plus type of contracted projects has long since been disproved. Policy development in most large, public organizations, such as the DoD, is the outcome of balancing the agency's interests, surrounding industry, congressional oversight and resource availability.
Recent research has shown EVM's benefit is actually greater on contracted projects where scope, schedule and costs are fixed, therefore making EVM effective with any project regardless of contract type. The primary difference between implementing EVM on cost-plus contracts as compared to fixed-price contracted projects is the accounting dimension. Fixed-price projects have a less-intense accounting burden.
Retrofitting EVM after a project is under way is a bad idea. For every benefit EVM brings to project management, it can bring equally detrimental effects if attempted on a project that's in progress. EVM significantly affects the way a project's scope of work is defined and budgeted.
To a lesser extent, EVM affects how a project is scheduled. The main reason is EVM requires a bottom-up approach to defining the full scope of work by using a "deliverable-oriented" WBS focused on end products. To the contrary, most projects in today's industries are planned along the lines of the trades to be used, the functions to be performed or the process to be followed. Attempting to redefine EVM's scope of work on a live project is tantamount to disaster.
It will disrupt the work, organization i. The time to implement EVM is in the preplanning stages of the project or, in other words, during project initiation.
Because most projects are initiated with some level of uncertainty; i. This is illustrated below. Establishing the baseline — an Iterative, three step process EVM Analysis All of the budgets on any project should be logged for successful baseline control. Occasionally contracted tasks may be temporarily held in abeyance, not yet authorized to a manager. When the project manager has yet to assign tasks and budgets to the CAMs, such as an authorized, not yet negotiated additional work, the task and its budget can be retained in undistributed budget UB.
These budget assignments, the WBS, and the functional organizational identity of the managers can be captured in a matrix as illustrated below.
This determination begins with classifying work tasks as one of three types: discrete, apportioned effort, or level of effort LOE. It must be stressed that work only begins when there is formal work authorization to proceed.
This requirement is a disciplined approach to clearly define work, schedule, and budget before work commences and actual costs begin to accrue.
How can someone be expected to manage the work effort when it is unclear what is to be done? The principles of EVM are quite clear in this regard. Accounting Considerations This section is a very straightforward, long standing project management set of 6 guidelines for capturing actual costs ACWP expended for project work effort.