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Understanding Earned Value Management: A Comprehensive Guide to Implementation and Measurement

Earned Value Management (EVM) is a vital planning process that integrates scope, schedule, and resources. It serves as a performance measurement tool, enabling project managers to report status, satisfy contract requirements, and forecast resource needs effectively. Key components include Budgeted Cost of Work Scheduled (BCWS), Actual Cost of Work Performed (ACWP), and Budgeted Cost of Work Performed (BCWP). This guide outlines how to develop a Performance Measurement Baseline, identify project scope, arrange work packages, and calculate variances, providing essential insights for effective decision-making in project management.

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Understanding Earned Value Management: A Comprehensive Guide to Implementation and Measurement

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  1. Earned Value Management How do we get started?

  2. What is it? • A planning process • An internal policy • A contract requirement • A way to measure performance • A way to identify problems • A forecasting tool • A way of doing business

  3. What is it? A way to integrate scope, schedule, and resources all at once!

  4. How is it used? • A reporting tool • Satisfy the contract reporting requirements • “filling the square” • As a decision-making tool • To evaluate project planning • To communicate status • To forecast resource needs

  5. Language of EVM • Budgeted Cost of Work Scheduled (BCWS) • The plan to spend budget • Actual Cost of Work Performed (ACWP) • The costs of the work that has occurred • Budgeted Cost of Work Performed (BCWP) • What was performed (what it should have cost) • This is EARNED VALUE

  6. Language of EVM • Schedule Variance SV = BCWP – BCWS • On/Off plan in dollars (>0 is ahead, 0 is on target, <0 is behind) • Schedule Performance Index SPI = BCWP/BCWS • On/off plan as a ratio (>1 is ahead, 1 is on target, <1 is behind) • Cost Variance CV = BCWP – ACWP • Over/under running (>0 is underrun, 0 is on target, <0 is overrun) • Cost Performance Index CPI = BCWP/ACWP • Return on actual costs (>1 is under, 1 is on target, <1 is over)

  7. Language of EVM • Budget Authority for unknowns • Management Reserve • Budget at Complete, BAC • The budget to do the work • Estimate to Complete, ETC • Estimate of the cost to do the remaining work • Estimate at Complete • Best guess of cost of entire cost of project • Latest Revised Estimate • Contractor’s best guess of cost of entire cost of project

  8. In a Picture EAC Management Reserve BAC PMB Schedule Variance Cost Variance $ ACWP BCWS BCWP time Time Now Completion Date

  9. How do we do this? • Performance Measurement Baseline • Scope • Identify the scope of work • WBS • Extend to Work package level

  10. How do we do this? • Performance Measurement Baseline • Schedule • Arrange work packages in order • Schedule start and finish • Classify work and choose EV technique

  11. How do we do this? • Performance Measurement Baseline • Budget • Identify needed resources (budget) • Spread budget • Calculate Cumulative BCWS

  12. How do we do this? • Performance measurement baseline Graph Cum BCWS

  13. Example Task Cost Start End WP1 9 1 3 WP2 12 3 7 WP3 28 3 4 WP5 8 6 9 WP5 10 1 10

  14. 1 2 3 4 5 6 7 8 9 10 WP1 WP2 WP3 WP4 Monthly BCWS Cumulative BCWS WP5 Example

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