EVM (Earned Value Management)The Director of the International MBA Master in Industrial Business Management at Bureau Veritas Centro Universitario, Eduardo Díez, talks to us in this week's post about EVM (Earned Value Management) as a technique to control costs during project execution.
One of the fundamental and priority aspects to keep under strict control during the execution of any project should be to periodically observe and analyze the evolution of its cumulative costs to compare them with those that had been planned in the typical S-curve or cost baseline associated with the approved budget . This is how the EVM emerged .
Baselines typically represent the planned cumulative costs facebook data of a project based on the phase it is in, with the highest costs typically occurring in the mid- to late- life phases of the project.
The EVM or earned value method is a very simple tool in its conception (it was developed in the 60s by the United States Department of Defense) that tries to integrate, under a single model, the management of the scope, deadline and cost of the project being executed, so that one can quickly glimpse, in monetary units, both the possible delay/advance of the same as well as its under/over cost .
It became, due to its conceptual simplicity and the recommendation of its use by internationally renowned institutions in Project Management , such as the PMI ( Project Management Institute) in its methodology guide for Project Management and Direction, the PMBoK ( Guide to the Project Management Body of Knowledge ), a globally recognised standard . This technique makes it possible to monitor the progress of the project .
EVM method application
Representative graph for application of the EVM method on the S curves that represent the accumulated costs of the project
Let us assume that the initial budget is the BAC value ( Budget at Completion ) and its estimated duration is SAC ( Schedule at Completion ). Then, at a given time point t (current time) where the analysis takes place, the deviations in costs and deadlines can be quantified as explained below.
EVM Structure and Application
Variables
Planned Value: PV is the budgeted cost of the scheduled work . The evolution of the planned value over time is the cost baseline. It represents the project's cumulative budget over time.