Earned Value Management (EVM)

Updated: Aug 17, 2020

What is Earned Value Management (EVM)?

Definition: Earned value Management basically means the process, tools, and procedures used by a Company before, during and at Project Completion to perform studies in order of Costs management that a project benefits in Project Management.

This technique allows you to keep track of all the benefits that come from a project. The benefits come in the form of improved project performance, greater efficiency, higher levels of profitability, decreased consumable costs, decreased contingencies and so on. Moreover, this technique helps in achieving the project's objectives. These include achieving the goals, cost cutting, productivity improvement, reducing risks, and much more. Moreover, this technique can also be applied for the benefits of the organization and its clients.

Projects are designed in such a way that their objectives and costs can be achieved by the organizations with the help of an organized process of project management. It includes a process that focuses on making it easy for the projects to complete and achieve their objectives. Moreover, it also involves an approach that enables the organizations to control their projects in the right direction and at the right time. The techniques employed in this process include Project Schedule, cost control, project prioritization, risk management, and so on.

Projects are managed by organizations that are working towards achieving their objectives. However, there are certain organizations that manage their projects with the set procedures. The Projects under these organizations are known as managed projects. Managed projects differ from other projects because they have a defined scope, a defined work sequence / Project Schedule, a defined budget, a defined method of project Execution, and so on.

Projects are Scheduled by organizations with a unique project life cycle that are characterized by the time taken for the projects to complete. Projects are delivered to the client's satisfaction with the help of a process of project control that ensures that the projects are done according to the specifications provided by the client.

Projects are delivered with a client's approval with a goal of having the projects deliver to their satisfaction within the deadline that is provided by the client. This will help the client in realizing the goals he has set for himself and for the project delivery.

Q: How is this technique utilized in project management?

A: In project management, this technique is used as an effective tool for achieving the project's objectives. This technique uses an analysis of cost versus benefit of the investments made in terms of their value.

Q: What are the benefits of Earned Value Management in Project Management?

A: The main advantage of EVM is that it focuses on the main benefits of the company. With this, the project manager will be able to make the necessary steps to achieve these through managing Budget, Expenses, Cash Flows & Assets throughout the Project Execution in line with Project Schedule as to complete the project in a Budget that was allocated at the first stage of Project Management.

Q: Will the client benefits through implementing Earned value Management in to the Project?

A: Off Course Yes. If a Project is being executed through maintaining EVM properly in line with Project Schedule and Project Budgeted Cost, It minimizes the risk factors involved during or at completion of the project. It indirectly benefits the clients where a contractor is benefiting.

Elements, Factors, Indices and Forecast studies in Earned Value Management:

There are 3 main elements involved in Earned Value Management:

  • Planned Value (PV)

  • Earned Value (EV)

  • Actual Cost (AC)

These Elements are further followed up by factors effected from these:

  • Cost Variance (CV)

  • Schedule variance (SV)

These Factors are further analysed for Project Performance through following Indices:

  • Schedule Performance Index (SPI)

  • Cost Performance Index (CPI)

These Indices Show us the Forecast of Project in 3 different ways:

  • Estimate at completion (EAC)

  • Estimate to complete (ETC)

  • Total Cost Performance Index (TPCI) - New

We are going to study above terminologies in detail in our upcoming Posts. Stay Tuned!


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