What is Earned Value Management (EVM)?
Earned Value Management (EVM) is a project management technique used to assess project performance by integrating cost, schedule, and scope. It provides a systematic approach to monitoring and controlling project progress and costs. Here’s a breakdown of the key elements and their functions:
- Planned Value (PV):
- This is the budgeted cost for the work that was planned to be completed by a specific time. It represents “how much was planned to be spent” according to the project schedule.
- Earned Value (EV):
- This is the value of the work actually completed up to a specific time, expressed in terms of the approved budget. It shows “how much value has been earned” for the work that has been performed.
- Actual Cost (AC):
- This is the actual cost incurred for the work performed up to a specific time. It indicates “how much has actually been spent” on the project.
Using these metrics, EVM allows project managers to perform the following analyses:
- Progress Evaluation:
- By comparing Planned Value (PV) with Earned Value (EV), project managers can determine if the project is on track according to the schedule. For example, if the PV is $100,000 and the EV is $80,000, it indicates that the project is behind schedule.
- Cost Analysis:
- By comparing Earned Value (EV) with Actual Cost (AC), project managers can assess whether the project is within budget. For instance, if the EV is $100,000 but the AC is $120,000, it indicates that the project is over budget.
- Performance Measurement:
- EVM also involves calculating performance metrics like the Cost Performance Index (CPI) and Schedule Performance Index (SPI) to quantitatively assess cost efficiency and schedule adherence.
The main goal of EVM is to provide a clear and objective view of project performance by integrating cost and schedule information. This allows for early detection of problems and facilitates corrective actions to keep the project on track.