Earned Value Management  Misconceptions – 5 Common EVM Errors

Earned value management misconceptions can introduce errors into a project control system. If your company is exploring a potential contractual need for using earned value management or implementing an Earned Value Management System (EVMS) to gain a competitive edge, dispelling common misconceptions is a useful exercise.

First, it is important to understand that the purpose of an EVMS is to provide:

• Reliable, timely, actionable information that can be used to manage a project more effectively
• Repeatable processes that foster credibility and goodwill with customers

Second, it is critical to keep in mind that when implementing an EVMS:

• Do not make it more difficult than it needs to be
• Avoid the “learning by mistakes” approach, which can increase costs and end-user frustration levels

Here are 5 of the most common misconceptions Humphreys & Associates consultants frequently encounter and some observations to help dispel them:

1. If you install software you have everything you need for a EVMS

False. Software toolsets can assist in the EVM process, but software is just one component. An EVM System requires instilling a disciplined and repeatable process that integrates all of the project control subsystems. This includes work organization, planning and scheduling, budgeting, accounting, work performance and analysis cycles, estimating what it will take to complete the remaining work (in time and resources) and managing changes to ensure the process provides useful information from project inception to completion.

The people using the project control system are a critical component to the successful execution and completion. All project stakeholders must actively use the system including upper level management, project managers, integrated product team (IPT) leads, schedulers, and control account managers (CAMs).

Beware of those who suggest that implementing a software tool set alone equates to an EVMS. Read more…

2. An EVMS prevents budget overruns or schedule delays

False. Unfortunately, this is a common misconception of both contractors and government program offices.

Properly used, an EVMS is an early warning system. It provides the means to identify issues early and proactively address them before they influence the ability to meet contractual requirements whether technical, schedule, or cost. Knowing how to identify risks and opportunities is an integral part of an EVMS. It is essential that managers at all levels know how to use the information the EVMS provides so they can respond quickly to deviations from a baseline plan.

EVM is a robust and effective tool when used correctly. Read more…

3. Variances are a bad thing

False. This is common misconception of both contractors and government project managers. The worst part of this misconception is that it causes people to do unwise things, such as hiding schedule or cost variances or producing rosy estimates at completion.

Hiding variances negates the whole purpose for implementing an EVMS. Variances are the early warning mechanism of an EVMS. Most projects endeavor to produce a reasonable and executable baseline plan, but what typically occurs is that work will deviate to some degree from the plan.

The performance variances and indices provide the ability to quickly identify deviations from the plan and determine the impact to the project.

That means management can be proactive and keep the project on track. Read more…

4. An EVMS is too rigid, requires too much detail

False. An EVMS does not inherently require more detail. A common error made by companies new to EVM is to drive the data down into too much detail, which can over complicate the planning and scheduling, budgeting, performance measurement, analysis, and change control processes.

What EVM does require is a defined logical approach to produce technical, schedule, cost, and risk data that are then fully integrated and tailored to the needs of each project. That means more upfront planning is required to determine the level of detail needed to manage the work effort based on risk, cost, and other factors for management visibility.

EVMS most certainly adds a level of discipline to the project management process. Frequently, the “too rigid” label is a result of self-induced pain or lack of understanding.

What is easy to overlook are the hazards, business risks, and costs related to ad hoc processes or project management by heroics. This results in regularly failing to meet objectives (overruns, late deliveries, last minute scrambles to the finish line), lack of visibility into the real status of the project (which results in unpleasant surprises for management), quality issues, rework, or unhappy customers and high frustration levels.

EVM principles can be used to improve the management and control of any project. Read more…

5. There is always a high cost to implement and use an EVMS

False. The implication in the statement above is that EVM provides limited or negative return on investment. This is a common argument when new business processes are introduced, especially when familiar processes are already in place; EVMS is a contractual requirement. To win certain contracts, an EVMS is required – for good reason. In these cases, management’s choice is either implement or decline to bid.

There is always a price tag for implementing new processes. The focus should be on determining the gap between what processes a company is currently using compared to the EIA-748 32 Guidelines. It may be a narrow or large gap – that gap determines the scope of the system design and implementation processes needed.

What is important to remember (and often missed) is that EVM is a set of proven project management principles that are applicable to any project. It can improve the ability of a company to meet commitments, increases management visibility, which helps to prevent expensive surprises and demonstrates a high level of project management maturity that can be used to a competitive advantage. All of these factors can reduce the overall cost to execute projects and, in turn, increase the company’s profit margin.

Yes, there is a cost to implement a disciplined project management process. But there are also significant, avoidable costs should a government or other large customer decides a company’s project control system is insufficient or is not implemented properly. Expensive emergencies and lost contracts can be averted by investing in proactive upfront planning.

Your credibility and goodwill with customers as well as your company’s ability to win projects may well warrant investing in a well-executed EVMS. Read more…

For a full-length version of this post, see Humphreys & Associates EVMS Education Center.