Earned Value Management (EVM)

Earned Value Management (EVM) - a project management technique that combines schedule & cost performance and it is about the investment returns in a given project.

It helps to answer the following question: “What did we get for the money we spent?”

Basic concepts of EVM:

• All project steps “earn” value as work is completed.
• The Earned Value (EV) can then be compared to actual costs and planned costs to determine project performance and forecast performance trends.
• Actual physical progress is measured in terms of dollars, hence schedule and cost performance can be analyzed in the same terms.
• Planned Value (PV)- the timephased budget and schedule, incremental plan which gives cost and schedule baseline.

The DOD Australia, DMO website on Performance Management defines the following as such:

• PV - The sum of the budgets for all work effort planned to be accomplished (ie. the plan).
• EV - The sum of the budgets for all work effort actually accomplished.
• Actual Cost (AC) - The actual costs incurred to date.
• Budget At Completion (BAC) - The sum of all budgets allocated to the contract. This does not include the contractor Management Reserve.
• Estimate at Completion (EAC) - Actual costs to date plus an estimate for work remaining.

In the next post, I will talk about the other EVM terms and formulae and how these help in measuring project performance.