10 Things You Need to Know About Earned Value Management

This free 25-page report provides a complete, comprehensive introduction to EVM techniques, including its history, reasons for its use, and how to calculate and interpret the basic EVM variables.

- DOWNLOAD NOW -
(Click Here)

Here is a summary of the 10 questions answered in this document:

• 1. What is Earned Value Management?

  
  EVM was established as a set of management practices and criteria that when applied to a project or a program helps the Project Managers (PMs) to effectively deliver their project’s full scope, on-time, and within budget.
  

• 2. Where did it come from and why is it mandated?

  
  EVM was developed back in the 60s in the Department of Defense as a set of good practice Project Management criteria and has been perfected, although barely changed, for over 30 years now. EVM has shown tremendous results in helping to manage and forecast massive, risky, and exploratory projects of all kinds. Our government has mandated these techniques because of their need for more predictable results and EVMS’s consistent ability to provide effective early warnings of cost or schedule problems.
  

• 3. How does EVM use the Work Breakdown Structure and Organizational Breakdown?

  
  EVM uses the WBS to help scope any given project and define the deliverables that will be produced in hierarchical format. The WBS should be a hierarchy of discrete tasks that correspond to actual projects deliverables. The OBS is just the hierarchical organizational structure usually known as an organization chart. EVM uses these two together with a Responsibility Matrix to relate the scope to the organization and define the reporting levels.
  

• 4. What are the methods of calculating “Earned”?

  
  EVM methods relate all of the deliverables in the WBS to schedule tasks and estimates of what it will cost to produce each deliverable. The sum of all the task budgets is the total budget for the project. Then as the tasks are completed they “earn” that task’s share of the total project budget. There are many methods of determining how “complete” a task is in percentage terms so that percentage can be applied to the task budget to derive an “Earned Value.”
  

• 5. How do you calculate EVM variances?

  
  EVM methods calculate an Integrated Project Baseline plan representing the cumulative expenditure of the project budget over time. Using this plan together with the Earned Value and the Actual Cost, EVM methods can show cost and schedule variances as:
  
  Cost Variance = Earned Value – Actual Cost
  and
  Schedule Variance = Earned Value – Planned Value
  
  The CV and SV can be shown with graphical or just tabular data.

• 6. How do you calculate EVM indices?

  
  EVM methods look at the performance data and extrapolate several performance trend metrics knows as the CPI and SPI. These are calculated as:
  
  Cost Performance Index = Earned Value / Actual Cost
  and
  Schedule Performance Index = Earned Value / Planned Value
  
  These metrics reflect both good and poor results on a task by task basis or for major portions of a project or for the entire project.
  

• 7. How does EVM predict the future?

  
  EVM methods use the CPI and SPI to yield an Estimate To Complete (ETC) for each task or for the major portions of a project, or for the entire project like this:
  
  o Performance to date has been anomalous: ETC = BAC – EV
  
  o Cost Performance to date will continue: ETC = (BAC – EV) / CPI
  
  o Both Cost and Schedule Performance to date will continue: ETC = (BAC – EV) / (CPI * SPC)
  
  EVM uses these together with the Actual Cost (AC) to project where tasks or the entre project will end up costing like this:
  
  EAC = AC + (BAC-EV)
  EAC = AC + (BAC-EV/CPI)
  EAC = AC + (BAC-EV)/(CPI*SPI)
  
  Depending on the project circumstances and experience.
  

• 8. What are the ANSI/EIA Criteria?

  
  The original C/SCSC criteria were incorporated in ANSI/EIA standard 748-98 in 1998 and were adopted by DoD the next year. EVM still retains its original criteria-based format with these 32 guidelines arranged five categories:
  
  • Organization
  • Planning, Scheduling, and Budgeting
  • Accounting Considerations
  • Analysis and Management Reports
  • Revisions and Data Maintenance
  
  

• 9. What are the five government standard reports?

  
  The original five government standard reports remain almost unchanged to today. They are:
  
  Format 1 – Work Breakdown Structure
  Format 2 – Organizational Categories (the same as Format 1 but by Organization)
  Format 3 – Baseline (a cash flow oriented report using EVM parameters)
  Format 4 – Staffing (very similar to Format 3 but organizationally focused)
  Format 5- Explanation and Problem Analysis (variance analysis of data from the other 4)
  
  These reports use a very similar format and are organized by either WBS or OBS with current period and cumulative sections for the EVM data along with variances and the Estimates at Completion (EAC).
  

• 10. If I get an EVM system will I be compliant?

  
  You can’t really buy a system (yet) that will make you compliant because it is still how you use it that counts. The trick (if there is one) is to extract the right data from the systems you probably already have and bring that data together with some purely EVM data like ETC and EAC to produce the EVM reports you need.
  

Get it Now Via E-Mail

If you prefer, we can e-mail this report directly to your inbox. Just enter your name and e-mail address below!

Name:

Email:

About the Author

Keith Custer, PE has over 30 years of consulting and management experience and is an expert in project management and the use of integrated cost and schedule techniques. Mr. Custer is an electrical engineer and has been involved in project management ranging from nuclear power electrical systems and controls to office telephony systems, international voice and data communications systems, computer systems, custom software development, and major package software applications like Financials, CIS, HR, CRM, MMIS, PMO, and ERP. His experience spans a wide range of industries including electric power, insurance, financial, retail, manufacturing, health care, and customer service. Mr. Custer has served as CIO, Program Manager, Project Officer, and Project Cost and Schedule Manager for companies such as Bechtel, SWEC, Oracle, Keane, IMRglobal, and Marriott as well as utilities such as FPL, NUSCO, MPL, Centerior, TECO, PECO, PPL, PSEG, SMUD, and GSU.