Monitoring Progress and Performance: Earned Value Management - 16

Deciphering Earned Value Management (EVM)

Earned Value Management (EVM) is a pivotal technique in project management, amalgamating scope, time, and cost data for performance evaluation. It enables the assessment of project progress by quantifying the "Percentage of Completeness" through Earned Value, integrating planned and actual expenditures.

Understanding EVM Components:

1. Planned Value (PV):

- Represents the Budgeted Spend Profile, established during the project's feasibility studies.

2. Actual Value (AV):

- Reflects the Actual Spend Profile, tracked by the finance team during monthly account closures.

3. Earned Value (EV):

- Derived from Budget x % Scope Completed, where determining the percentage of completed scope remains a challenge due to lack of standardization.

Challenges in Calculating Scope Completion Percentage:

- The difficulty lies in quantifying the percentage of scope completed accurately and consistently.

- Lack of a standardized method for calculating this metric hinders the precise evaluation of Earned Value.

Seeking Solutions for Standardization:

1. Exploring Standardization Methods:

- Research and identify industry-specific or project-related standards for measuring completed scope.

2. Collaboration and Best Practices:

- Engage with industry experts, forums, and project management communities to gather insights and best practices used to standardize scope completion percentages.

3. Developing Internal Guidelines:

- Establish internal guidelines or benchmarks based on historical data or similar projects to create a more standardized approach.

EVM Application: Formulas and Case Study Illustration

Formulae Graph & Formulae Table:  

Here are the fundamental formulas:

Name	Description	Formula	Interpretations
Schedule Variance (SV)	The amount by which the project is ahead or behind the planned delivery date as on status date	SV = EV - PV	Positive = Ahead of schedule Zero = On schedule Negative = Behind schedule
Cost Variance (CV)	The amount of budget surplus or deficit as on status date.	CV = EV - AC	Positive = Under Budget Zero = On Budget Negative = Over Budget
Schedule Performance Index (SPI)	A measure of schedule efficiency	SPI = EV / PV	>1.0 = Ahead of schedule 1.0 = On schedule <1.0 = Behind schedule
Cost Performance Index (CPI)	A measure of the cost efficiency	CPI = EV / AC	>1.0 = Under Budget 1.0 = On Budget <1.0 = Over Budget

- Scheduled Value (SV)

- Actual Cost (AC)

- Earned Value (EV)

Additionally, a comprehensive case study demonstrating the utilization of Earned Value Curves will be provided to illustrate practical EVM application in project scenarios. The Earned Value analysis will provide project insights and support the decision-making process. 

How to read Earned Value S-Curves? 

Below presented are a few cases of earned value curves with possible reasons for the deviations. 

Case Study: Below is an example of a 32-month long project with an INR 1450 Cr budget, 15 months into the project the earned value S Curve plotted looks as below.  

What would have happened in the project? 

• For the initial phase of the project earned value S Curve for the project indicates that earn value and actual cost are higher than that of plan values. This may be due to starting work before the NTP date after the project award. 

• During the 9‐13th month, project progress slowed down, which may be due to the delay in material receipt at the site or may be due to the extended rainfall. 

What could happen next in the project? 

• Schedule Variance went on decreasing from the start of the project to date and the SPI trend between 13‐15 months is very nearer to 1. This indicates taking appropriate steps so that the project will not go further down and maintain the same pace. Any uncertainty in the upcoming days will lead the project to a delayed path. So, the current phase of the project is very critical and requires continuous mentoring to achieve success. 

• As the actual spend profile during the 9‐13th months indicates that Contractor has something to bill. So, the Employer should make the funds ready for the project. 

Conclusion

EVM stands as a valuable project management tool, yet the challenge of standardizing scope completion percentage persists. Seeking industry standards, leveraging collaborative efforts, and establishing internal guidelines are pivotal steps toward addressing this challenge. Stay tuned for the forthcoming case study, exploring Earned Value Curves and their practical implications in project assessment.