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Earned Value Management

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Earned Value Management (EVM) is a project control process based on a structured approach to planning, cost
collection and performance measurement. It facilitates the integration of project scope, time and cost objectives and
the establishment of a baseline plan for performance measurement.

Earned Value Analysis (EVA) is a proactive way of managing and controlling projects and is used extensively in a
range of industries and is increasingly being used as a project management tool in construction. In principle EVA
compares the amount of work planned and its budget against the amount of work actually carried out, its budget and
its actual cost. The measurement of this can be used to show the current status of a project in terms of cost and time
measured against the baseline plan and also to forecast the outturn positions.

Preparation for using EVA should commence at the outset of a project. Initially a Work Breakdown Structure must be
developed breaking down the work into appropriate elements reflecting the way the project is to be managed.
Typically this will be in trade packages. The work elements are then developed, quantified and priced and resources
allocated to activities on the programme schedule. This schedule forms the baseline for monitoring and control of the
project using EVA.

During the implementation of the project, progress percentages are assessed at regular intervals for each activity
along with resource utilisation taken from allocation sheets and cost data taken from cost reports. Comparing the
actual information collected in this manner against the baseline plan will allow the following indices to be calculated:

Earned Value (EV) = % Complete x Budget for each activity

Schedule Performance Index (SPI) = Earned Value / Planned Value
Cost Performance Index (CPI) = Earned Value / Actual Cost
Schedule Variance (SV) = Earned Value – Planned Value
Cost Variance (CV) = Earned Value – Actual Cost

EVA highlights trends and allows outturns to be predicted and has been shown to be a very accurate project
management tool. Much of the reason for this is that it imposes good project management disciplines. In the
development phase it requires detailed pre-planning and the preparation of a resourced programme linked to the price
or budget for the project. Subsequently during the implementation phase, it requires the collection of as-built records
and the analysis of actual performance against the plan.

Practical difficulties, such as a potential reluctance by trade contractors to provide required information, must be
anticipated and pre-empted. Tender documentation should be drafted to include a stipulation that detailed cost and
resource information must be provided and in this way EVA can be used to manage trade packages as well as the
project as a whole.

Below is an example that will elaborate a simplistic explanation of EVM principle and application, it uses
the PMBOK-4th edition acronyms.

Tricia is the Planner in charge of 20 miles of sidewalk project.

According to your plan, the cost of construction will be $15, 000 per miles and will take 8 weeks to complete.

2 weeks into the project, you have spent $55, 000 and completed 4 miles of sidewalk, and you want to report
performance and determine how much time and cost remain.

Solution:

BAC = [How much we originally expected this project to cost]-BUDGET

= [20 miles of sidewalk] x [$15,000 per mile]
= $300, 000.00

PV = [How much work was planned for this point in time]

= Planned % complete x BAC
= [2 weeks completed on an 8 weeks schedule] x BAC
= 2/8 x 300,000
= $75, 000.00

EV = [How much has been earned on the project]

= Actual % complete x BAC

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