Earn Value Management (in short EVM) is a method to know the current status and future of your project progress. It is a technique that measures
the project performance and helps in project forecasting. It combines - Schedule, Cost and Scope into single integrated systems to provide
the actual results of your project.
Earn Value Management was first used by the United States (USA) department of defense (DoD) in the year 1960s. EVM was based largely on
the principal of 'Earned Time' that was very popular during 20th century in the manufacturing industries. During the period between
1985-to-1995 the EVM becomes one of the project management methodologies that can be used by all the managers across the organization.
Now the EVM is not only implemented across all the US government departments and agencies but also found an important place in Public and
Private Companies.
Nasa, United States Department of Defense, Acquisition Management (UK), Project Management Institute (PMI),
Society of Cost Estimating and Analysis are some of the well known organizations that uses EVM to manage their projects.
Basic Principal of EVM
- The EVM has three basic elements - Planned Value (PV), Earned Value (EV),
and Actual Cost (AC).
- 'Planned Value' is also known as the baseline value that refers throughout the
project.
- 'Earned Value' tells how much work has been completed.
- The Earned Value (EV) is used to compare the actual costs to the planned costs
to determine the project progress and performance.
- This helps to find the project variances.
What are the basic steps to follow?
- The first steps is to define the tasks using Work Breakdown Structure (WBS).
- The Second step is to assign a planned value to each tasks or activity.
- The third step is to define a 'earning' rules for each tasks or activity.
- The fourth and final step is to run the project and get the 'Earned Values'.
Based on the above values the various calculations are determined as explained below:
1. Budget At Completion (BAC = Baseline Work) - BAC is the sum of planned
value (PV) at the completion of the project. It tells you the total budget allocated
to your project.
2. Earned Value (EV) - Earned Value is the total work earned out of the planned
value (PV) on or before the report end date. It is a actual work completed on the
specified date. This is also referred to as the "Budgeted Cost of Work
Performed (BCWP)".
3. Planned Value (PV) - It's a baseline work if task is scheduled to be completed on
or before the report end date. This is also referred to as the "Budgeted Cost
of Work Scheduled (BCWS)".
4. Actual Cost (AC) - It's an actual cost of work if task is 100% completed on or
before the report end date. It gives you the total cost actually incurred to
complete the work on specified date. This also referred to as the "Actual Cost
of Work Performed (ACWP)"
