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What is Earned value management system (EVM)

20th November, 2019

Earned value management system (EVM) is a practice which project management professionals developed to evaluate performance & progress of a project. Implementation of this system in a project can provide,

  • An early indication of budget or time overrun
  • More sensitive data for effectual decisions.
  • Enhance the process of planning
  • Indicate potential risks
  • Increases accountability of project
  • Make clear & consistent communication to all management levels.

Key elements of the Earned value management (EVM) system can be identified as follows

Planned value [PV]

Expected budget estimated (as per the work) based on the work breakdown structure is called as planned value. This should be identified based on the project schedule. Values should be identified in accordance with the project time frame. Based on the project programme each month planned value should be derived.

Earned Value [EV]

This is the Key element of Earned value management system(EVM). Project manager should be determining the actual accomplishment of work on a given date based on the work breakdown schedule.

Actual Cost [AC]

This is the actual cost of the each element based on the work breakdown schedule.

Cost variance [CV]

This indicates the cost performance of the project, particular work or element. CV is the difference between Earned value & actual cost [CV =EV- AC]. If cost variance is a positive value it shows complimentary indication of the project, particular work or element.

Cost performance index [CPI]

This shows cost efficiency of the project, specific work or element. Formula to derive CPI is EV/AC (ratio between earned value & actual cost). If this value is equal or greater than the one it means efficiency of expenditure of the project, specific work or element is good.

Scheduled variance [SV]

This shows whether the project is achieving the baseline schedule or not (whether project, work or element is behind the schedule or ahead the schedule) in accordance with the WBS. Formula to scheduled variance is difference between the EV and PV.

Schedule performance index [SPI]

this shows work efficiency of the project or work element. Formula to derive SPI is EV/PV (ratio between earned value & planned value). If this value is equal or greater than the one it means efficiency of work done of the project or the specific work is good.

Estimate to complete [ETC]

This is the cost required to complete all the balance work of the project or specific work. Calculation of ETC should be more accurate and it can be difficult.

Estimate at completion [EAC]

EAC is the value of actual cost plus estimated to complete (EAC= AC+ETC) or the anticipated total cost of the completion of the project or the work element.

For implementation of Earned Value Management (EVM) process Project Manager should make a comprehensive plan for both budget & time of the project. This should be planned & implement before project starts, budget and time should be according with the work breakdown structure (WBS).

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