Earned Value Management (EVM)

Overview

Earned Value Management (EVM) is a method of project management to access project process in a purposeful manner. This method is capable in integrating scope, schedule and cost in one single system. When applied systematically, Earned Value Management (EVM) offers early warnings about performance difficulties. In addition, Earned Value Management (EVM) also promises to make better the project scope, prevent scope sneak, communicate project to stakeholder in the company and keep working group dedicated for attaining progress.

Earned Value Management (EVM) has its drawbacks too, for example, EVM can show a project under budget, or scope completely executed, while in practical terms there may a possibility exist of unhappy customers or an unsuccessful project. Managers can not fully depend on EVM; it’s just another tool of project manager’s toolbox. By extrapolating from the amount of work already put into the project, the project managers can get an estimate on how much resources the project will have used at completion.

Primary functions of a project manager in Earned Value Management are:

• A work breakdown structure (WBS): A list of all tasks broken down in a hierarchical structure.
• Project master schedule (PMS): A Gantt chart of what task will be done when and by whom.
• Budgeted cost of work scheduled (BCWS) or planned value (PV): for every period the budgets of the tasks that were planned to be finished in this time unit. 'How much work should be done?'.
• Budgeted cost of work produced (BCWP) or earned value (EV): for every period the budgets of the tasks that actually finished in this time unit. 'How much work is done?' Actual cost (AC) of work produced (ACWP) or effort spent: For every period the actual costs of the work. 'How much did it cost?'.
• Estimate to complete (ETC), the projection of remaining costs to be incurred; this is an estimate based on best current information, irrespective of budget.
• Budget at completion (BAC): The total budget estimated to be spent to complete a project.
• Total funding available (TFA): The budget the client has committed to.
• Negotiated period of performance (NPOP): The time period the client has agreed upon with the project manager.
• Planned period of performance (PPOP): The time period thought required to finish the project.
• Cost accrual ratio (CAR): The total average cost per person per time unit.
• Forecast of remaining work (FCST) or current schedule: The work that still needs to be done after this time unit.

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