Earned value management (EVM)

Definition

Earned value management (EVM) is a project management technique that integrates the scope of work, schedule, and cost to assess project performance and progress. It allows project managers to measure how much work has been completed at any point in time relative to the planned work and the actual costs incurred. By comparing these metrics, EVM provides insight into project health, helping managers make informed decisions about budgets and timelines.

5 Must Know Facts For Your Next Test

1. EVM allows project managers to evaluate performance in terms of cost and schedule, giving a clearer picture of where the project stands.
2. The three key metrics in EVM are Planned Value (PV), Actual Cost (AC), and Earned Value (EV), which together help assess project progress.
3. EVM can identify variances early, enabling corrective actions before minor issues become major problems.
4. Using EVM, project managers can forecast future performance based on current trends, which aids in budgeting for remaining work.
5. EVM is widely used across various industries, including construction, software development, and defense, due to its effectiveness in managing complex projects.

Review Questions

• How does earned value management help project managers track progress and performance?
  • Earned value management helps project managers track progress by providing a systematic approach to compare planned work versus actual accomplishments. By using metrics like Planned Value (PV), Actual Cost (AC), and Earned Value (EV), managers can gauge if a project is on schedule and within budget. This technique allows for early detection of variances, enabling timely adjustments to keep projects aligned with their goals.
• Discuss the importance of integrating scope, schedule, and cost in earned value management.
  • Integrating scope, schedule, and cost is crucial in earned value management because it provides a comprehensive view of project performance. This integration helps ensure that all aspects of a project are aligned and progressing together. If one area falls behind or exceeds budget constraints, it can affect overall project success. By combining these elements, EVM enables better decision-making and enhances the likelihood of delivering projects on time and within budget.
• Evaluate how earned value management can influence decision-making processes in project management.
  • Earned value management significantly influences decision-making processes by providing real-time data on project performance. Project managers can analyze variances between planned and actual metrics to determine if corrective actions are necessary. Additionally, EVM helps forecast future performance trends, allowing for proactive adjustments in resource allocation or timelines. By relying on this structured approach to performance measurement, managers can make more informed decisions that lead to successful project outcomes.

Related terms

Planned Value (PV): The budgeted amount for the work scheduled to be completed by a specific point in time.

Actual Cost (AC): The total cost incurred for the work completed by a specific point in time.

Cost Performance Index (CPI):

A measure of cost efficiency on a project, calculated as the ratio of earned value to actual cost.