EARNED VALUE MANAGEMENT SYSTEM (EVMS)
EVM is a project evaluation technique to measure a project’s progress, alert to deviations from schedule and budget baselines, and forecast its completion date and final cost.
EVM has proven to be a valuable tool for project/contract managers and is used in a wide variety of government contracts and in much of the private sector as well.
By providing schedule and cost performance assessments of both the total project and its breakdown of structure elements, EVM can identify problem areas so that you can take the most effective corrective actions.
BASIC CONCEPTS OF EARNED VALUE MANAGEMENT (EVM):
The following items illustrate the analysis of schedule and cost performance using the EVM technique.
- In the work scope planning stage, all activities are assigned a “dollar value” termed the Budgeted Cost for Work Scheduled (BCWS). In other words, the BCWS represents the planned work in terms of the planned cost of that work. Physical progress is measured in dollars, so schedule performance and cost performance can be analyzed in the same terms.
- During contract execution, activities “earn” the apportioned dollar value based on the amount of work actually completed, termed as the Budgeted Cost for Work Performed (BCWP). In other words, the BCWP represents the work that is completed in terms of the originally planned cost for that work.
- The actual amount of money spent on the completed work is tracked as the Actual Cost of Work Performed (ACWP).
- The BCWP can then be compared to the ACWP to determine any cost variance (under- or over-spending).
- The BCWP can also be compared to the Budgeted Cost for Work Scheduled (BCWS) to determine any schedule variance (ahead or behind schedule).
- The BCWP and ACWP can also be used to anticipate future performance trends and forecast any changes to the Completion Date or the Estimate at Completion.
EVM is now considered a best practice for project and programme management. The US Departments of Defence and Energy, NASA, the FAA and other technology-related agencies have adopted EVM as a central tool for the management and performance measurement of their procurement programs.
