What is Earned value management (EVM)?
Earned value management (EVM) is a method used in project management to evaluate the progress and performance of a project. It involves comparing the planned value, or budget, of a project with the earned value, or actual work completed, and the actual cost of the project. By using EVM, project managers can identify any potential budget or time overruns, make more informed decisions, enhance the planning process, identify potential risks, increase accountability, and improve communication within the management team.
EVM has several key elements, including planned value (PV), earned value (EV), actual cost (AC), cost variance (CV), cost performance index (CPI), scheduled variance (SV), schedule performance index (SPI), estimate to complete (ETC), and estimate at completion (EAC). PV represents the expected budget for a project based on the work breakdown
EV is the actual progress of a project or specific work element based on the schedule. AC is the actual cost of a project or work element. CV measures the cost performance of a project, while CPI shows the efficiency of expenditure. SV measures whether a project is on schedule, while SPI shows the efficiency of work completed. ETC is the cost needed to complete the remaining work on a project, and EAC is the anticipated total cost of completing a project.
To implement EVM, project managers should create a comprehensive plan for both budget and time, including a work breakdown structure (WBS) to identify major works and allocate time and cost accordingly. During the execution phase, project managers should assess the value of work completed, the actual cost of the work, and the variance between the two. By regularly monitoring these values, project managers can make adjustments to stay on track and meet their project goals.