Earned value management (EVM) methodology empowers project management professionals to effectively plan, track, and forecast the status of a project’s scope, cost, and schedule. Effective implementation of EVMS depends on a viable work breakdown structure (WBS), project schedule and budget, and earned value schedule and cost metrics used to monitor and measure project performance quantitatively. The EVMS applies various terminologies to analyze, measure, and forecast the cost of project completion. The most salient are planned value, actual cost, and earned value. Others include estimate at completion (EAC), estimate to completion (ETC), budget at completion (BAC), cost performance index (CPI), schedule performance index (CPI), schedule variance (SV), cost variance (CV), and to complete performance index (TCPI). The success of the Earned Value Management System also depends on top management buy-in, understanding of these terminologies, and participation of all stakeholders.
This paper attempts to validate EVMS by defining and explaining the methodology, identifying the advantages and disadvantages of EVMS.
Definition and Explanation of Earned Value Management
As figure 1 shows, Earned Value Management is a cost, schedule, and scope management methodology or tool. It integrates organization, planning, scheduling, budgeting, accounting, analysis, reviews in calculating risks associated with a project schedule, cost project scope, and measuring and forecasting performance.
The power of the forecast makes it possible for project professionals to understand the status of projects. Project managers must break the project scope into manageable pieces, id them, create an account budget, a work schedule, and earned value metrics to achieve the overarching objective, validate, and practice EVM best practices. The earned value metrics include cost performance index (CPI), schedule performance index (CPI), (g) schedule variance (SV), cost variance (CV), and to complete performance index (TCPI). These metrics measure, quantitatively, the performance of schedule, cost, and scope. EVM also can set up a baseline plan by which future performance and resources can be compared and measured.
Figure 2 illustrates how well the project is performing and completing its goals according to schedule and budget.
