Earned Value Management Concept (EVM)

Earned Value Management Concept (EVM)

EVM stands for Earned Value Management. It is a project management technique that integrates scope, schedule, and cost to assess project performance and progress. EVM provides a set of metrics that help project managers track the performance of a project against the baseline plan.

The key components of EVM include:

Planned Value (PV)
The planned value, also known as the budgeted cost of work scheduled (BCWS), represents the authorized budget for the planned work to be completed by a specific date.

Earned Value (EV)
The earned value, also known as the budgeted cost of work performed (BCWP), represents the value of the work actually completed and verified by a specific date.

Actual Cost (AC)
The actual cost, also known as the actual cost of work performed (ACWP), represents the total cost incurred for the work performed up to a specific date.

Based on these components, EVM calculates several key performance indicators (KPIs) to assess project performance, including:

1: Cost Performance Index (CPI)
CPI is calculated as EV divided by AC, indicating the efficiency of the project in terms of cost. A CPI greater than 1 indicates that the project is under budget, while a CPI less than 1 indicates that the project is over budget.

2: Schedule Performance Index (SPI)
SPI is calculated as EV divided by PV, indicating the efficiency of the project in terms of schedule. An SPI greater than 1 indicates that the project is ahead of schedule, while an SPI less than 1 indicates that the project is behind schedule.

3: Variance Analysis
EVM also enables variance analysis, which compares the planned performance (PV) with the actual performance (EV and AC) to identify deviations and take corrective actions to keep the project on track.

EVM provides project managers with a comprehensive view of project performance, helping them make informed decisions and take corrective actions to ensure project success.