EARNED VALUE

MANAGEMENT
SYSTEM

Introduction

Earned value management (EVM) is a project

management technique
for
measuring
project
performance and progress in an objective manner.
It relates resource planning and usage to schedules
and technical performance requirement.
It brings cost and schedule variance analysis together.
EVM is considered one of the most powerful and
productive concepts utilized in managing todays
complex projects in private, commercial or government
environments.

Objectives of EVM

Relate time phased budgets to specific contract tasks

and/or statements of work.
Provide the basis to capture the work progress
assessment against the baseline plan.
Relate Technical, Schedule and Cost performance.
Provide valid timely and auditable data /information for
proactive management action.
Supply managers with a practical level of
summarization for effective decision making.

KEY PARAMETERS OF EVMS

EVM consists of the following three basic elements:

Planned Value
Actual Cost
Earned Value

Planned value
Planned value (PV) is also referred to as Budgeted
Cost of Work Scheduled (BCWS). PV or BCWS is the
total cost of the work scheduled/planned as of a reporting
date.
It is calculated as:

Actual Cost:
Actual cost (AC) is also referred to as Actual Cost of
Work Performed (ACWP). AC or ACWP is the total cost
taken to complete the work as of a reporting date.
It is calculated as:

Earned value:
Earned value (EV) is also referred to as Budgeted
Cost of Work Performed (BCWP). EV or BCWP is the total
cost of the work completed/performed as of a reporting
date.
It is calculated as:

Cost Performance Indicator (CPI):

Cost Performance Indicator (CPI) is an index
showing the efficiency of the utilization of the resources
on the project.
CPI can be calculated using the following formula:

A CPI value above 1 indicates the efficiency of utilizing the

resources allocated to the project is good.
A CPI value below 1 indicates the efficiency of utilizing the
resources allocated to the project is not good.

Schedule Variance (SV):

Schedule Variance (SV) indicates how much ahead
or behind the schedule a project is running.
It can be calculated using the following formula:

Schedule Performance Indicator (SPI):

Schedule Performance Indicator (SPI) is an index
showing the efficiency of the time utilized on the project.
SPI can be calculated using the following formula:

An SPI value above 1 indicates the project team is very efficient in

utilizing the time allocated to the project.
An SPI value below 1 indicates the project team is less efficient in
utilizing the time allocated to the project.

EVM Example

Program managers, project managers, and in fact, managers at

all levels need to know some vital information about projects such
as:
1) How much work has been done?
2) How much has it cost?
3) What do we now estimate the likely final
cost to be?
4) When do we now estimate the planned
work will be complete?
Earned Value analysis can throw light onto all of these
questions as explained in the diagram in the next slide.

BENEFITS OF EVMS

It is a single management control system that provides

reliable data.
It integrates work, schedule and cost using a work
breakdown structure (WBS).
The associated database of completed projects is
useful for comparative analysis.
The cumulative cost performance index (CPI) provides
an early warning signal.
The CPI is a predictor for the final cost of the project.
The periodic (e.g. weekly or monthly) CPI is a
benchmark.

Factors For The Better Use Of EVM

Longer experience in using EVM.

Use of integrated product teams.
Use of the critical path method network techniques
as a complementary scheduling tool.
Organization having high levels of cross
organizational boundary communications.

Factors For The Better

Performance Of EVM

Use of on-the-job training.

Project managers technical and administrative expertise.
Use of automated computer programs.
Provision of sufficient resources in the process of EVM.
High levels of communications within an organization.
A colleague-based work environment.

CONCLUSION

Earned Value Analysis is a better method of program/project

management because it integrates cost, schedule and scope and
can be used to forecast future performance and project completion
dates.
It helps managers in making evidence based decision about
project scope, resources, and cost in overall project oversight.
As a competitive purpose, the strategic management needs for
enhancing cost and schedule control capabilities under globalized
competition require to furnish EVMS techniques.
The main contribution of the EVMS process was the motivation of
the project manager and his staff concerning the cost management
and the goal to finish the project on budget.
EVMS inspires the participants to pay more attention to costs and
progress, motivates the participants to discuss the cost elements
with more intensity and optimize the costs resulting in a project that
was finished on time and on budget.

Thank You!