If you are a project manager, you know how important it is to monitor and control your project’s progress and performance. You need to ensure that your project is on time, on budget, and meeting the quality standards and expectations of your stakeholders. But how do you measure and report these aspects of your project effectively?
One of the most widely used methods for tracking and reporting project progress and performance is Earned Value Management (EVM). EVM is a technique that integrates scope, schedule, and cost data to provide a comprehensive view of your project’s status and health. EVM can help you answer questions such as:
- How much work have we completed so far?
- How much work remains to be done?
- How much time and money have we spent so far?
- How much time and money will we need to finish the project?
- Are we ahead or behind schedule?
- Are we over or under budget?
- Are we delivering the expected value to our stakeholders?
In this blog, we will explain the basic concepts and steps of EVM and how you can use it to track your project progress and performance.
What is Earned Value Management?
Earned Value Management (EVM) is a project management technique that compares the planned value (PV) of the work that should have been done by a certain point in time with the actual cost (AC) of the work that has been done and the earned value (EV) of the work that has been completed. By comparing these three values, EVM can provide quantitative indicators of the project’s performance in terms of schedule and cost variance (SV and CV) and schedule and cost performance index (SPI and CPI).
EVM can also be used to forecast the future performance of the project based on the current trends. EVM can estimate the time and cost required to complete the project (ETC and EAC) and the variance at completion (VAC). EVM can also calculate the expected value of the project at completion (EVP) based on the planned value and the cost performance index.
How to Use Earned Value Management?
To use EVM, you need to follow these steps:
1. Define the scope of your project and break it down into manageable work packages or activities. Assign a budget and a duration for each work package or activity. This will form your project baseline or plan.
2. Measure the actual cost (AC) of the work that has been done by tracking the expenses incurred for each work package or activity.
3. Measure the earned value (EV) of the work that has been completed by multiplying the planned value (PV) of each work package or activity by its percentage of completion.
4. Calculate the schedule variance (SV) by subtracting the planned value (PV) from the earned value (EV). A positive SV means that you are ahead of schedule, while a negative SV means that you are behind schedule.
5. Calculate the cost variance (CV) by subtracting the actual cost (AC) from the earned value (EV). A positive CV means that you are under budget, while a negative CV means that you are over budget.
6. Calculate the schedule performance index (SPI) by dividing the earned value (EV) by the planned value (PV). An SPI greater than 1 means that you are ahead of schedule, while an SPI less than 1 means that you are behind schedule.
7. Calculate the cost performance index (CPI) by dividing the earned value (EV) by the actual cost (AC). A CPI greater than 1 means that you are under budget, while a CPI less than 1 means that you are over budget.
8. Estimate the time required to complete the project (ETC) by dividing the remaining work (PV – EV) by the cost performance index (CPI).
9. Estimate the cost required to complete the project (EAC) by adding the actual cost (AC) and the estimated time to complete (ETC).
10. Calculate the variance at completion (VAC) by subtracting the estimated cost at completion (EAC) from the planned value (PV). A positive VAC means that you will finish under budget, while a negative VAC means that you will finish over budget.
11. Calculate the expected value of the project at completion (EVP) by multiplying the planned value (PV) by the cost performance index (CPI). This represents the value that you will deliver to your stakeholders based on your current performance.
Conclusion
Earned Value Management is a powerful tool for tracking and reporting your project’s progress and performance. It can help you identify problems early on and take corrective actions accordingly. It can also help you communicate your project’s status and health to your stakeholders in a clear and objective way.
However, EVM is not without its limitations and challenges. It requires accurate planning and estimation of scope, schedule, and cost. It also requires consistent and reliable data collection and analysis throughout the project life cycle.
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Works Cited
(1) Using Earned Value Management to Measure Project Performance. https://www.projectmanager.com/blog/using-earned-value-management-to-measure-project-performance
(2) How To Use Earned Value Management + Formulas & Examples. https://thedigitalprojectmanager.com/projects/pm-methodology/earned-value-management/
(3) Earned Value Management: A Way to Measure Project Performance. https://www.float.com/resources/earned-value-management/
(4) How to use EVM (Earned Value) in Microsoft Project – Incl. Report Example. https://www.tacticalprojectmanager.com/evm-microsoft-project/