Earned Value Management (EVM) is a term frequently mentioned in project management. To gain a deeper knowledge of this concept as well as have a proper control towards a project, this article is for you to consider. With this first part of the blog, IMT-PM will give you some primary measures and related forecasts.
EVM is developed by the United States Department of Defense in the 1960s to trach the performance of its programs. To this day, EVM has become commonly used by all governments, organizations as their means of measuring and managing performance.
EARNED VALUE (EV): The authorized, budgeted value of the work that you have completed to date on your project.
- Budget at Completion (BAC): represents the total budgeted cost of your project.
- Budgeted Cost of Work Scheduled (BCWS): is also known as the planned value.
- Budgeted Cost of Work Performed (BCWP/EV): is the value according to the budget of all the tasks completed so far.
- Actual Cost of Work Performed (ACWP): is a measure of the total money actually expended on the tasks completed so far.
Therefore, the difference between the budgeted cost and the actual cost represents the cost performance.
What EVM is particularly good at is combining cost performance on the one hand and scheduled performance on the other. Thus, it’s easy to take a project and recognize whether you’re running ahead or behind schedule, or you have spent more or less budget than you expected.
FORECASTS EVM PRODUCE:
1. Cost Forecasts:
- Estimate to Complete (ETC)
- Estimate at Completion (EAC)
2. Variances from the Plan:
- Cost Variance (CV)
- Schedule Variance (SV)
- Variance at Completion (VAC)
3. Performance Measures:
- Cost Performance Index (CPI)
- Schedule Performance Index (SPI)
In conclusion, EVM is a tool that enables us to understand our performance in terms of cost and schedule at the same time and make calculations to forecast how the project will perform.
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