Earned value
has a number of different names.
·
Cost/schedule planning and control system
·
Cost/Schedule Control Systems Criteria (C/SCSC)
·
CS2
·
Earned value performance measurement
·
Earned value management
·
Performance measurement
·
Earned value performance management
·
Earned value project management system
·
Earned value analysis
some people
refer to earned value as an entire concept to evaluate cost,
schedule and performance. Others refer to it as work accomplished
to date.
The History
of Earned Value
While earned
value did not officially appear until the 1960s, measurement using
standard costs has been around for many years in manufacturing
enterprises.
The date that
is most commonly used for the emergence of earned value is 1967.
During that year, the United States Department of Defense (DoD)
adopted earned value as Cost/Schedule Control Systems Criteria
(C/SCSC), governed by DoD Instruction 7000.2.
The original
intent of C/SCSC was to prevent cost overruns by contractors on
major government projects by integrating cost, schedule, and
technical performance management. Once earned value performance
measurements were implemented, government contractors could no
longer spend to their heart’s content without meeting government
client expectations.
Earned Value
Performance Measurement
Earned value
performance measurement is a consistent way to analyze project
performance.
Because of its
consistency, EVM objectively measures project work. When you use
EVPM, you effectively manage technical, cost, and schedule so that
your clients rely on timely project data.
EVPM is a
management technique. Equate it with physical progress of your
project. The earned part of its name signifies that effort
is needed. The value part indicates that something
beneficial takes place when your project team completes tasks. As
you move forward and earn value, you complete percentages of your
project.
As the original
C/SCSC name implies, EVPM is concerned with controlling cost and
performance. One noteworthy aspect about EVPM is that it usually
expresses schedule and performance in terms of money. For
labor-intensive projects, use labor hours. Your accounting
department will help you work out the financial details.
The benefits of
using EVPM are as follows:
EVPM
creates a comprehensive baseline plan.
EVPM
utilizes measurement tools.
EVPM assists
with forecasting.
EVPM
communicates results to stakeholders.
EVPM
provides corrective action plans.
EVPM
facilitates mid-project progress reporting.
The Mechanics
of Earned Value
Earned value
performance measurements are clearly defined by using a matrix.
1.
Baseline plan
(planned value).
2.
Earned value.
3.
Actual cost.
4.
EVPM matrix.
5.
Variance and
index analysis.
Using EVPM
1.
Create a Work
Breakdown Structure (WBS) to separate your project into
controllable pieces and assign responsibility.
2.
Identify and
list activities to place in earned value mode.
3.
Assign costs
for each activity.
4.
Sequence
activities in a budget.
5.
Complete your
budget to create an S-curve (planned value).
6.
Review your
budget to understand it very clearly.
7.
Make sure
requirements do not exceed available capacity for any period.
8.
Monitor your
project’s progress and enter information for actual cost and for
earned value in the correct field in your budget.
9.
Report
unfinished portions as balances and as percentages.
10.
Calculate
variances and indices.
11.
Analyze
variances and report to appropriate stakeholders.
12.
Take corrective
action.
13.
Revise your
budget (if necessary).
Applying
Earned Value
Acceptance of earned value performance measurement, although
growing in popularity, is far from universal. Users of EVPM either
sing its praises or avoid it like a plague. Advocates of earned
value view it a practical tool that saves money and prevents
surprises. Some people consider EVPM helpful but not worth the
trouble or the money. Antagonists cite the high level of effort to
make it work and view EVPM as a waste of time.