Earned Value Management

Earned Value Management (EVM) is a method for performance measurement and cost control of projects. It systematically captures and analyzes actual costs, the value of work performed, and the planned value. EVM helps to detect performance deviations and risks early and enables better management of projects. This glossary entry details the individual aspects and metrics of Earned Value Management and illustrates how projects can be successfully implemented using this method.

Earned Value Management in Detail

Earned Value Management (EVM) is a widely used method for performance measurement and cost control in projects. It is based on the systematic recording and analysis of actual costs, the value of work performed, and the planned value. The goal of EVM is to identify performance deviations and risks early on and to enable better project management. This glossary entry explains the individual aspects and metrics of Earned Value Management in detail.

Fundamentals and Terms

To understand Earned Value Management, some basic terms need to be clarified:

 
• Planned Value (PV): The planned value refers to the budgeted cost of work scheduled to be completed by a certain date in a project. It indicates how much a project should have cost up to that point.
 
• Actual Cost (AC): Actual costs are the expenses incurred for the work performed in a project up to a certain date. They show how much a project has actually cost so far.
 
• Earned Value (EV): The Earned Value corresponds to the value of work actually completed in a project up to a certain date. It shows how much a project is worth so far, regardless of the actual costs.

Using these metrics, performance deviations and cost overruns can be detected and assessed. By systematically recording and analyzing these values, a project can be better managed and, if necessary, corrected.

Calculation and Analysis of EVM Metrics

Earned Value Management distinguishes between performance variances (Performance Variance) and cost variances (Cost Variance). The following calculations are applied:

 
• Performance Variance (PV - EV): The difference between the planned value and the Earned Value shows whether a project is on schedule or not. A positive performance variance indicates that the project is progressing faster than planned. A negative performance variance means that the project is lagging behind schedule.
 
• Cost Variance (EV - AC): The difference between the Earned Value and actual costs shows whether a project is within budget or not. A positive cost variance means that the project is less expensive than planned. A negative cost variance indicates that the project is more expensive than planned.

In addition, EVM uses efficiency metrics:

 
• Cost Performance Index (CPI): The Cost Performance Index is calculated by dividing the Earned Value by the actual costs (EV / AC). A CPI greater than 1 indicates that the project is more efficient than planned. A CPI less than 1 means that the project is less efficient than planned.
 
• Schedule Performance Index (SPI): The Schedule Performance Index is calculated by dividing the Earned Value by the planned value (EV / PV). An SPI greater than 1 indicates that the project is progressing faster than planned. An SPI less than 1 means that the project is progressing slower than planned.

By analyzing these metrics, project managers can detect early on whether a project is on time and within budget, and take appropriate measures to successfully complete the project.

Application of Earned Value Management

Earned Value Management can be applied in all phases of a project, from planning through execution to post-completion. It is important to regularly capture and evaluate the metrics to respond early to performance and cost deviations.

EVM is suitable for both small and large projects and can be used across different industries. However, it is important to ensure that the capture and analysis of the metrics are adapted to the specific requirements and conditions of the project.

Conclusion

Earned Value Management is a proven method for performance measurement and cost control of projects. By systematically recording and analyzing planned value, actual costs, and Earned Value, project managers can detect performance deviations and risks early and take appropriate measures. This enables better management of projects and increases the likelihood of a successful project completion.