Practical implementation of Earned Value Management – pros and cons

Earned Value Management (EVM) is one of the most effective available project management approaches which incorporates all levels of management and provides an early forecast of the project. It has offered a system that can manage effective performance by identifying trends, forecasting problems, and seeing their solutions.

Most importantly it provides visibility into whether or not the project is on track to be completed within the budget and on time as per the baseline project schedule. It does so by taking project basic information like planned progress, actual progress, actual cost, budgeted cost, planned value, and earned value. These values generate other project indicators like the cost performance index (CPI), schedule performance index (SPI), cost variance, schedule variance (SV), the budgeted cost for works performed (BCWP), the actual cost for works performed (ACWP), estimated cost to complete (ETC), and estimated cost at completion (EAC). These all terms are mostly mathematical terms and require some calculations and sound knowledge of project management and its techniques is a must for these calculations.

EVM is yet a favorite tool for most project managers to evaluate project performance. But the question of whether EVM is to be implemented in all of our projects or not is intriguing in everyone’s mind.

This blog post intends to cover different aspects related to the practical implementation of the EVM technique, along with its advantages and disadvantages.

Is it feasible to implement the EVM technique on our projects?

EVM technique can easily be implemented on projects having a proper budget, schedule, cost accounting methods, and a good project manager. Whenever this technique is denied on projects, it shows that the project lacks one or all of these criteria.

Projects with clear scope, a proper plan, and following international quality and safety standards can easily implement EVM techniques for project performance measurement.

How to practically implement the EVM technique on projects?

EVM implementation is complex, especially for organizations unaware of its processes. However, following the necessary steps can help maximize its practicality and streamline its application:

• Scope of works to be defined. It is mostly already defined by most organizations.
• Work Breakdown structure should also be defined. So, the project is divided into different smaller parts for better management.
• Prepare a budget for the project. This is a critical part of this method. A detailed budget for the project consisting of estimated costs for all works to be performed along with management overheads and reserves should be part of this budget.
• Project plan or schedule of works to be developed. This plan shall consist of different milestones, activities, and tasks up to different levels of scheduling.
• Resource loading of project schedule – project schedule shall be loaded with all resources which will be required to complete specific tasks.
• Progress update and monitoring mechanism – project manager needs to set a mechanism for updating and monitoring progress on a daily, weekly, or bi-weekly basis.
• Cost capturing system – a proper system to capture actual cost incurred on the project should be there.
• Management resource – the project manager or planner is required to implement EVM successfully by taking inputs from all steps and generating reports for actuals and forecasts.
• Track project progress – regular reporting is required for tracking project progress. EVM technique will be the most effective one for tracking and monitoring purposes.

Benefits of implementing EVM?

Properly used, EVM is a flexible process that provides timely information about a project’s performance and health. Effective use of its concepts can put our project back on track.

Following are some points explaining about advantages of implementation of EVM:

• Only available system to track cost, schedule, and work at a time for any project.
• It provides the realistic status of the project.
• It allows project managers to rectify issues that occurred or that might occur when the project advances.
• It does not require more data other than is already required for normal project management.
• Early indication for project stakeholders of any risk and to get prepared for possible obstacles.
• The risk management plan has been eased up after using EVM for better assessment, analysis, and mitigation of hazards.
• Project transparency in terms of cost has been improved using the EVM technique.
• EVM enables accurate forecasting.
• It helps in evaluating the magnitude of deviation of a project from its baseline.
• It enhances motivation for the team if a project is delivering on a positive side.
• The value of the variance of cost and schedule is determined, which in turn helps in checking accuracies of the budget and schedule.
• It motivates for implementation of project control.
• If more than one project is ongoing for an organization, it is the best tool to evaluate which project is performing best.
• It supports management to focus on real threats other than chasing problems.
• This technique helps in negotiations and decision-making processes.
• It allows management to manage resources for balanced work on a timely basis.

Explore how integrating Earned Value Management (EVM) techniques can enhance outcomes within an Integrated Project Delivery (IPD) framework. Learn more about IPD and its advantages here.

Limitations to implementing EVM?

EVM is not a solution to every problem and also it will not work in every situation. Just like any other technique, this one also has limitations for the practical implementation of the project. Its application limits when project scope and duration increase. Also, the project manager who is implementing it should be versatile with this technique.

Following are some points explaining about disadvantages and limitations of the implementation of EVM:

• EVM covers cost and time effectively, but it does not consider quality. This could be the major drawback of this technique. It may be possible that our project is going positive on the earned value performance scale, but the quality of work is below par.
• EVM tells about variance and deviations but doesn’t tell about how to rectify them.
• The data required for all EVM calculations may not be available to the team, hence it may lead to its limitation of implementation on projects.
• It requires knowledge and skills in project management techniques.
• Every stakeholder including top management of the project may not be familiar with difficult and less known terms of EVM.
• This technique relies on accurate data and without accurate data, all calculations can mislead management.
• Management could be manipulated by changing a few values in backend calculations.
• The time required to gather all of this data and to do these calculations is sometimes too much for some of the project managers, which limits its implementation.
• A lack of expertise in this technique may result in misleading management.
• The cost associated with its implementation can also be a factor for its limited implementation.

Conclusion:

Earned Value technique offers more advantages than disadvantages. All factors leading to its limitation are summed up as a lack of data, knowledge, expertise, resources, and time for its implementation. A good organization has a proper mechanism of defining project scope, developing the project schedule, loading resources to schedule, preparing of budget, updating of schedule, capturing actual cost, and tracking of project schedule can easily implement this technique to obtain the realistic status of the project without additional cost.

Integration of cost and schedule is achieved through EVM and it helps project managers to anticipate any possible delays. Therefore, it reduces costs in many ways along with helping in the assessment of risks. Project reporting, performance, visuality, transparency, and forecasting have been improved a lot with the use of Earned Value Management technique.

A lot of care should be taken while implementing this technique for large and complex projects for organizations new to this technique, guidance from consultancy firms or subject matter experts shall be requested.