Earned Value Management (EVM)

Earned value management (EVM), earned value project management, or earned value performance management (EVPM) is a project management technique for measuring project performance and progress in an objective manner.

EVM is more than a unique project management process or technique. It is an umbrella term for 32 guidelines that define a set of requirements. The basic concept of EVM is more than a unique project management process or technique. It is an umbrella term for 32 guidelines that define a set of requirements that a contractor’s management system must meet. The objectives of an EVMS are to:

• Relate time phased budgets to specific contract tasks and/or statements of work.
• Provide the basis to capture work progress assessments against the baseline plan.
• Relate technical, schedule, and cost performance.
• Provide valid, timely, and auditable data/information for proactive project management analysis and action.
• Supply managers with a practical level of summarization for effective decision making.

Once the contractor’s EVM System is designed and implemented on a project, there are significant benefits to the contractor and to the customer. Contractor benefits include increased visibility and control to quickly and proactively respond to issues which makes it easier to meet project schedule, cost, analysis, and technical objectives. Customer benefits include confidence in the contractor’s ability to manage the project, identify problems early, and provide objective, rather than subjective, contract cost analysis and schedule status. Earned value management does introduce a few new terms. Contractors’ internal systems must be able to provide:

• Budgeted cost for work scheduled (BCWS), sometimes called the planned value.
• Budgeted cost for work performed (BCWP) or earned value.
• Actual cost of work performed (ACWP).
• Budget at completion (BAC).
• Estimate at completion (EAC) which is comprised of the cumulative to date actual cost of work performed plus the estimate to complete the remaining work.
• Cost variance (CV) which is calculated as BCWP minus ACWP. A result greater than 0 is favorable (an underrun), a result less than 0 is unfavorable (an overrun).
• Schedule variance (SV) which is calculated as BCWP minus BCWS. A result greater than 0 is favorable (ahead of schedule), a result less than 0 is unfavorable (behind schedule).
• Variance at completion (VAC) which is calculated as BAC minus EAC. A result greater than 0 is favorable, a result less than 0 is unfavorable.