Earned Value Management (EVM) aids project managers in effectively measuring the performance of a project. It is a methodical approach utilized for finding variances in projects according to a comparison of the performed work and planned work.
The Importance of Earned Value Management
EVM is utilized on project schedule and cost control and may be extremely helpful for project forecasting. A critical element of EVM is the project baseline, which acts as the reference point for project activities related to EVM. EVM then delivers crucial quantitative information for better decision-making regarding projects.
Benefits of Earned Value Management Implementation
Upon the completion and implementation of an earned value management system, considerable benefits can both be experienced by the client and the contractor. The client will feel more confident with the contractor’s capacity to oversee the entire project, determine issues as soon as possible, and deliver objective contract analysis of costs and schedules.
Contractors, on the other hand, will be afforded increased control and visibility for proactively and rapidly responding to problems, making it easier for them to meet cost, schedule, and analysis schedules, as well as technical goals. An effective EVM system must always include the following:
- BCWS: Budgeted Cost for Work or Planned Value (PV)
- BCWP: Budgeted Cost for Work Performed or Earned Value (EV)
- ACWP: Actual Cost of Work Performed
- BAC: Budget at Completion
- EAC: Estimate at Completion, made up of updated cumulative ACWP along with the estimate for completing the outstanding work
- CV: Cost Variance = BCWP – ACWP
- SV: Schedule Variance = BCWP – BCWS
- VAC: Variance at Completion = BAC – EAC
Ensuring Proper Earned Value Management Implementation
Because of the increased demands and errors to more effectively handle performance of projects, contractors are finding themselves under intense scrutiny and pressure. In addition, they are also now required to comply with strict government reporting schedules. Lacking the proper tools, complying with these stringent policies will be an enormous task.
With this in mind, you can consider using software solutions like Deltek Cobra to help you along the way. With this, after their Deltek Cobra training, your project team will be able to focus their time on project performance analysis and corrective action applications for project success.