Need of Earned Value
Management in Project Execution
What is
Earned Value Management?
Earned Value
Management (EVM) is a systematic approach to the integration and measurement of
cost, schedule, and technical (scope) accomplishments on a project or task. It
provides the ability to examine detailed schedule information, critical program
and technical milestones, and cost data.
Earned Value
Management is intended to provide data like
– Relate
time-phased budgets to contract tasks
– Integrate
cost, schedule, and technical performance
– Indicate
work progress objectively like
– Are valid,
timely and auditable
– Are from
the internal system the contractor uses to manage
– Are at a
practical level of summarization
Why use
Earned Value Management?
By using
Earned Value and implementing an Earned Value Management System (EVMS), the
following questions can be answered objectively:
• Where have
we been?
• Where are
we now?
• Where are
we going?
Traditional Management vs. Earned
Value Management
In
Traditional management, there are two data sources, the budget (or planned)
expenditures and the actual expenditures. The comparison of budget versus
actual expenditures merely indicates what was planned to be spent versus what
was actually spent at any given time. But how much has been produced? This
approach there in no way to determine the physical amount of work performed. It
does not indicate anything about what has actually been produced for the amount
of money spent nor whether it is being produced at the rate, or according to
the schedule, originally planned. In other words, it does not relate the true
cost performance of the project.
Earned Value
Management
In Earned
Value Management, unlike in traditional management, there are three data
sources:
– the budget
(or planned) value of work scheduled
– the actual
value of work completed
– the “earned
value” of the physical work completed
Earned Value
takes these three data sources and is able to compare the budgeted value of
work scheduled and compare it to the “earned value of physical work completed”
and the actual value of work completed.
Traditional
management provides us how much money and time a particular job is likely to
require prior to starting and once stated, how much money was spent at any
given time.
Earned Value
Management provides us how much money and time a particular job is likely to
require prior to starting and once stated, how much money was spent at any
given time along with
•Once
started, what work has been accomplished to date for the funds expended (what
you got for what you spent)
•Once
started, what the total job will cost at completion, and how long it will take
to complete
Framework for
an Earned Value Management System (EVMS) can be divided into three phases:
1. Inputs
-what is needed to implement Earned Value
2. Earned
Value Methods – formulas, metrics and performance measurements used
3. Outputs –
reporting requirements (structure, time-phases, details)
Inputs needed
for Earned Value Management System (EVMS)
• Work
Breakdown Structure (WBS)
•
Organizational Breakdown Structure (OBS)
• Project
Schedule
• Time-phased
Baseline Budget
•
Cost/Resource Control Plan
• Change
Control Plan
The Earned
Value method required for an EVMS includes:
• Planned
Value (PV), Earned Value (EV) Actual Cost (AC)
• Metrics and
Performance Measurements
• Forecasting
• Integrated
Baseline Review
The outputs
required for an EVMS include:
• Reporting
requirements
• Proper
Analysis of Reports WBS/OBS
• Correct
Action taken
In comparing
Earned Value Management to Traditional Management, Traditional Management does
not allow for analysis of the physical amount of work performed. Earned Value
Management allows for both schedule and cost analysis against physical amount
of work performed.
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