Understanding Earned Value Management Concepts |
| Date Added: May 13, 2011 05:49:58 AM |
| Author: Rodrigo Buzeta |
| Category: Business & Economy |
| Earned Value Management (EVM) is the methodology that allows project managers to compute their project performance. It is one of the logical processes of project management which helps managers in hunting variances in their projects based on certain factors. These factors primarily find out the difference between work done and work planned. EVM makes use of schedule and budget control and therefore prove to be very effective in forecasting about the projects. One of the most essential components of EVM is project baseline. Project baseline acts as the reference point for all other Earned Value Management activities. While proceeding with the project management and decision making, it is very essential to get the quantitative data so that you can make out where you stand actually. You can know about the importance of Earned Value Management from the fact that today is used as a mandatory tool in U.S. government. Apart from being extremely effective in government projects, EVM is also very effective methodology in private sector companies as well as educational establishments. A few popular companies that make use of EVM are NASA, Project Management Institute (PMI), Society of Cost Estimating and Analysis, Defense Acquisition University, Federal Acquisition Institute and Acquisition Management (UK). Earned Value Management is a well recognized method of management on the international level. Depending on the report from General Accounting Office (GAO), a MOU (memorandum of Understanding) was also singed by Canada, U.S. and Australia. This MOU was based on schedule and cost management for acquisition and this gave the worldwide recognition to EVM. Let us now understand about important concepts of EVM. Variances: Cost Variances (CV): It tells whether the project is over budget or under budget. This is represented symbolically as CV = EV-AC. The negative of this representation is over budget while the positive shows under budget. Schedule Variances (SV): It tells whether the project is lagging behind or is ahead of the actual time. This is represented symbolically as SV = EV-PV. The negative of this representation depicts behind schedule and the positive represents ahead of schedule. Variance at Completion (VAC): VAC tells a project manager about the total cost of the project and the expected cost. Symbolically it is represented as VAC = BAC – EAC. For any project manager, understanding these representations is very crucial. By understanding these variances, the project managers can get the project going. These variances or the primary components of Earned Value Management help the project managers in analyzing their project performance. By understanding these essential points and studying about the earned value thoroughly, managers are likely to get greater benefits than expected. Earned Value Management is one such methodology that allows you to get a precise picture of your projects and work in accordance to the progress. Whether the project will help you in achieving success or failure can be predicted in advance with the help of earned value system. Seeing the importance of Earned Value, today there are several managers who are gaining greater achievements and enhanced project performance through this method. Rodrigo Buzeta - PMP, PgMP is the author of this article on Earned Value Management. Find more information on EVM here. |
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