1. Introduction to Earned Value Management
EVM Introduced by
Stan Taylor
to
Democratic Alliance – North West Province
Gerda Tullues & Team
11 November 2016
2. What is Earned Value Management?
• Earned Value Management (EVM) is a project management technique for measuring project or
contract performance and progress;
• EVM has the ability to combine measurements of the project management triangle:
• Scope
• Time
• Costs
• In a single integrated system, EVM is able to provide accurate forecasts of project and contract
performance problems, which is an important contribution for good project performance;
• Traditional methods for evaluating a projects or contracts health can cause misleading results.
The EV process is a proven method for identifying the specific areas of a project that need early
management intervention while they are still correctable;
• It is therefore considered a Performance Management approach
3. Why Use Earned Value Management ?
Early Warning System: You will find one of the most important functions of EV is to provide an
early warning system. This means a projects performance and productivity issues can be
identified very early in a project’s life. Significant cost and schedule variances are detectable
when the planned work has reached as little as 10% completion on any portion of the project.
Course Corrections: Part of the EV process is to determine the cause of performance issues in
order to develop a corrective action plan. Course corrections are made much easier when
performance issues are identified early. This is because the problem is still relatively small and
there is plenty of time left in the project to allow a recovery plan to work.
Management by Exception: A project managed at a control account or work package level
allows management to easily identify the accounts with performance problems. Management can
then focus its efforts on correcting those areas. Alternatively, management can recognize the
areas of the project showing good performance.
Communication Tool: Communication is stifled when problems are hidden. It usually backfires
when there is an expectation that problems will fix themselves. EV is a communication tool
helping everyone associated with a project to understand the answers to important questions like;
What is the scope?;
When is the work planned to be accomplished?;
What is the estimated cost of the planned work?;
What is the progress of the work?
4. PV (Planned Value) or BCWS (Budgeted Cost of Work Scheduled)
AC (Actual Cost) or ACWP (Actual Cost of Work Performed)
EV (Earned Value) or BCWP (Budgeted Cost of Work Performed)
SV (Schedule Variance)
CV (Cost Variance)
SPI (Schedule Performance Index)
CPI (Cost Performance Index)
EAC (Estimate at Completion)
Earned Value Terminology
5. Defined Scope of Work;
Work Breakdown Structure (WBS);
Approved Schedule;
Approved Estimate / Contract;
Monthly actual expenditure / claims;
Monthly Schedule updates
Requirement to implement Earned Value
6. Project Sponsors & Project Managers
Only focus on SPI & CPI (> 1 is ahead of Schedule & Under Budget);
No need to go into too much detail to understand health of project;
Dashboard can be created to make reporting more understandable for Stakeholders
Project Teams
Cost Controllers can Pro-actively manage the cost vs performance;
Cost Controllers can detect if material is wasted;
Costs can be easier forecasted and analysed;
Early warning on Scope, Cost & Schedule variances;
Clear indication if costs is wasted or payments is made without actual achievements
Government, Investors, Tax payers and Stakeholders
Funds will be spend according to actual achievements;
Projects will be delivered as per Scope & Schedule
Who will benefit by using Earned Value
10. Example of work done
0
200 000 000
400 000 000
600 000 000
800 000 000
1 000 000 000
1 200 000 000
Sep
11
Oct
11
Nov
11
Dec
11
Jan
12
Feb
12
Mar
12
Apr
12
May
12
Jun
12
Jul
12
Aug
12
Sep
12
Oct
12
Nov
12
Dec
12
Jan
13
Feb
13
Mar
13
Apr
13
May
13
Jun
13
Jul
13
Earned Value Analysis
PV vs AC vs EV
PV AC EV
0
0,2
0,4
0,6
0,8
1
1,2
1,4
1,6
1,8
2
Sep
11
Oct
11
Nov
11
Dec
11
Jan
12
Feb
12
Mar
12
Apr
12
May
12
Jun
12
Jul
12
Aug
12
Sep
12
Oct
12
Nov
12
Dec
12
Jan
13
Feb
13
Mar
13
Apr
13
May
13
Jun
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Jul
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Earned Value Analysis
CPR & SPR
CPR SPR
11. Can Project Teams afford not to do Earned value on
Projects or Contracts?
NO !!
The ultimate goal of any project is that it meets its deadlines, accomplishes its objectives and comes
in at or under budget.
In September 2009, a study released by ObjectWatch, a market research and consulting firm,
showed that failed information technology projects alone cost worldwide businesses and agencies
$6.2 trillion per year.
While there is no system that can guarantee that your project will succeed, Earned Value
Management (EVM) will give your project a better chance for success.