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Introduction to Earned Value Management (EVM)

Earned Value Management (EVM) is a project control technique based on a structured approach to cost collection and performance measurement.

EVM enables the objective measurement of progress by comparing actual accomplishments against a stable and agreed Performance Measurement Baseline (PMB). It is a management and planning / monitoring technique that relates resource planning to performance, cost and time requirements and informs Risk and Opportunity assessments. Earned Value data is derived from a historical activity i.e. “planned work that has been accomplished” and can be used to forecast outcomes. EVM is employed by a number of Defence and Civil Contractors to manage their own programmes. Importantly, EVM is supported by the NAO ‘Gold Standard’ and is widely established amongst suppliers.

A successful EVM implementation relies upon realistic planning and scheduling activities and a robust risk management process.

Earned Value can be used to establish a regular payment plan. It should always be linked to a realistic milestone payment plan. Such payments are referred to as Payment By Earned Value (PBEV) [597KB PPT] .

The requirement for more rigorous project control and reporting is highly important. Organisations are seeking to better understand their position with regard to their maturity in the area of cost and schedule control.

It is possible for an organisation to utilise many of the facets of EVM without formal recognition that it is doing so.

For organisation to assess their EV maturity the Association for Project Management (APM) Earned Value (EV) Specific Interests Group (SIG) has developed an Earned Value Maturity Model. The model has been independently approved for use in the defence industry by the MOD and Industry Peer Group (MIPG). Access to the model is through normal APM channels and is free for APM members.

Benefits

EVM facilitates the integration of project scope, time and cost objectives and the establishment of a baseline plan against which performance can be measured during the project.

When used appropriately EVM:

Reinforces and spreads best practice in project management.
Strengthens the commercial bond.
Provides a structured and robust reporting process.
Provides accurate and timely data for management action.
Establishes links between activity scheduling and cost.
Forces project managers to consider and address budget and resource issues.
Promotes an integrated approach to project management.
Gives visibility of risk contingency and its consumption.
Provides the basis for an independent assessment of likely outcome in terms of cost and schedule.

Analysis

Forecasts

Earned Value management is mandatory for DE&S projects entering the Demonstration phase and with a value greater than £20m and is outlined in DE&S EVM mandate [39KB PDF].

In all other cases an Earned Value Management decision tree [1.7MB PDF] should be used to establish whether it is appropriate.

Where it is apparent that EVM may not be the most appropriate technique, projects should describe how they intend to control cost and schedule in their project management plan.

Change History

1 August 2010: Revised to bring the content up to date with latest EVM guidance and DE&S mandates.
1 December 2009: Revised to bring the content up to date with latest EVM guidance and DE&S mandates.; Minor amendments made for Plain English review.
1 October 2009: Updated to include benefits information.