Earned Value Management – A Simple Explanation

by Humphreys & Associates on February 10, 2013

Earned Value Management – A Simple ExplanationEarned value management or EVM in short is a strategy used by top management personnel to keep track of costs and schedules. Designed in the 1960’s by the US Department of Defense, the system was initially used to screen and acquire defense contracts. The criteria for cost and schedule control systems have been recently revamped, bringing it to 32 criteria to be considered in the latest earned value management system by EIA-748 standards.

Earned value management systems can be applied in projects of every cost and size although it is more commonly used for complex projects with tight schedules and huge budgets. The EVM system has been refined and developed over the years and today, it is used by big organizations such as NASA and the Project Management Institute and Acquisition Management in the UK. Its usage is also widespread in private sectors across different fields and industries. There are many advantages of using the EVM system.

Firstly, EVM provides accurate performance tracking. Under this system, primary and derived data are used to keep track of project performance. Using actual figures, the system generates trends that can be used by project managers to compare what was achieved against what was originally planned. The data set obtained will assist the project manager in deciding whether or not the project is on track. Also, he can use the data to accurately forecast problems such as scheduling delays, budgeting and whether the projected profits are met.

Secondly, EVM helps project and control account managers gauge the progress of a project accurately by comparing the planned against actual work accomplished. Project risk and its appropriate response can be identified earlier and proactive actions can be taken to reducenegative impact. If an overrun is forecast, the problem can be presented to stakeholders at an earlier time.

Lastly, the implementation of EVM system reduce risks. Risk reduction facilitates a more effective communication with stakeholders, especially when additional funding is required.

In short, the EVM system is an effective tool in a project manager’s arsenal. When used correctly, the system can accurately track the performance of a project and reduce project risks.

For a more in-depth explanation of the basics of Earned Value Management, see our EVMS Education Center or call our corporate office to obtain a copy of our EVM  pocket booklet pictured above on how to do Project Management with EVM.

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