Linesight Planning Manager, Marion Close, discusses the use of EVM and how it is implemented.
Although many are familiar with the term EVM, there can be some ambiguity around both its definition and the value that it brings to a project.
"Earned Value Management is a management methodology for integrating scope, schedule, and resources; for objectively measuring project performance and progress; and for forecasting project outcome."
2011 Project Management Institute (PMI) ‘Practice Standard for Earned Value Management – Second Edition’
The use of EVM should be considered to help control performance, especially if the project is fairly complex. By providing schedule and cost performance assessments of both the total project and its breakdown of structure elements, EVM allows you to identify problem areas so that you can take the most effective corrective actions. It is only one of the many tools and techniques available, but one that deserves consideration.
It is vital that from the outset there is a fully defined Work Breakdown Structure (WBS) which represents the full project scope and strategy, and that it is outlined at a level of detail that supports the management of the project. Although some information may not be finalized and agreed, we can make assumptions and use activity placeholders until the final information is fully available and broken down into greater detail later. A simplistic example would be Figure 1 below: A1, A2 and A3 still need to be defined, whereas A4 has been broken into more detail. A weighted percentage value of resources will also be defined and allocated to each of the WBS.
Once the defined phases are detailed out, to ensure that the schedule is set up correctly, a Schedule Health Check (SHC) is completed based on the 14-point DCMA (US Defense Contract Management Agency) assessment as a guide for quality. Conducting the SHC will verify that the schedule is of acceptable technical quality, under the following headings:
Once the schedule is resource-loaded and estimated hours assigned, and the schedule integrity is validated, the baseline should then be agreed by all stakeholders and set to measure against. The next step is to extract the assigned resource hours from the scheduled activities, into a tool for presenting Planned and Earned Value in a graphical format. These incremental values are plotted on a graphical image (example Figure 2.)
Once the project is underway, it will then be progressed on an agreed period timeframe – updating the schedule with established incremental progress, extracting the EV from the schedule reporting period, and plotting it against the Planned Value (PV) on the baseline chart (Figure 3). Variances in these charts will indicate the health of the project against what was planned. Irregularities in the EV curve can cause peaks and troughs, and the basis behind them must be fully understood. It is important that the analysis evaluates any and all cause and effects, and that these are fully documented in the periods schedule report.
The Schedule Variance (SV) can be determined to indicate the variance between where you planned to be versus where you are currently (EV-PV=SV). This metric will highlight whether the schedule is ahead or behind. The Schedule Performance Index (SPI) will demonstrate a measure of how efficient the project has been in accomplishing the work relative to the plan for its accomplishment.
EVM is a valuable technique used to trend project performance at an early stage and in particular, to clearly highlight potential issues and opportunities. Trends and patterns of progress should not be ignored; instead they need to be analyzed, understood and communicated to management, ensuring that they have a solid basis to make key project decisions. By utilizing EVM, a project will become more proactive rather than reactive to issues, all the while increasing the opportunity for project success.