Earned value management (evm)

Definition

Earned value management (EVM) is a project management technique that integrates scope, schedule, and cost to assess project performance and progress. It enables project managers to measure how much work has been completed in relation to the planned work and the actual costs incurred, providing a comprehensive view of project health. By utilizing EVM, stakeholders can better predict future performance and make informed decisions regarding resource allocation and project adjustments.

5 Must Know Facts For Your Next Test

1. EVM uses three key metrics: Planned Value (PV), Earned Value (EV), and Actual Cost (AC) to provide insights into project performance.
2. The Earned Value metric helps to determine if a project is ahead, behind, or on schedule based on the work completed compared to what was planned.
3. Calculating the Cost Performance Index (CPI) using EVM helps project managers understand how efficiently resources are being used.
4. EVM allows for early identification of potential issues, enabling proactive management and corrective actions before problems escalate.
5. By comparing EV to PV and AC, stakeholders can effectively forecast future project performance and make more informed decisions.

Review Questions

• How does earned value management (EVM) help in evaluating a project's overall performance?
  • Earned value management (EVM) provides a systematic approach to evaluating a project's overall performance by comparing the planned progress against the actual progress and costs. By analyzing Planned Value (PV), Earned Value (EV), and Actual Cost (AC), project managers can gauge whether the project is on track, ahead, or falling behind schedule. This insight allows for timely adjustments in resource allocation and planning, ensuring that the project meets its objectives.
• What role do the metrics Planned Value (PV) and Actual Cost (AC) play in the context of earned value management?
  • In earned value management, Planned Value (PV) represents the estimated value of work that should have been completed by a specific time, while Actual Cost (AC) reflects the total costs incurred for the work performed up to that point. These metrics are crucial for calculating Earned Value (EV), as they enable project managers to assess not only how much work has been accomplished but also whether that work has been achieved within budget. This relationship allows for a comprehensive evaluation of both schedule adherence and cost efficiency.
• Evaluate the effectiveness of earned value management as a forecasting tool for project outcomes.
  • Earned value management is highly effective as a forecasting tool because it combines scope, schedule, and cost metrics to predict future project performance. By analyzing the relationships between Earned Value (EV), Planned Value (PV), and Actual Cost (AC), project managers can identify trends and potential issues early on. This foresight enables proactive decision-making, which can significantly improve the likelihood of staying within budget and meeting deadlines, ultimately leading to successful project completion.

Related terms

Planned Value (PV): The estimated value of the work planned to be completed by a specific time in the project schedule.

Actual Cost (AC): The total cost incurred for the actual work performed up to a specific point in time during the project.

Cost Performance Index (CPI):

A measure of cost efficiency on a project, calculated by dividing earned value (EV) by actual cost (AC).