To EVM or not to EVM?

Should you always apply Earned Value Management to a project? Some staunch EVM advocates will without hesitation give you an affirmative while others who don't believe that EVM provides meaningful data will tell you to steer clear of it.


Let's first explore why you may want to apply EVM on a project. There are a few reasons which may include some or all of the below:

  • Cost & Schedule alignment

  • Total project cost projections

  • Schedule and Cost variances

  • Setting a baseline


There are more reasons than those listed above, but the point I'm trying to make is that you need to firstly figure out what information you are trying to obtain and then you'll be in a better position to assess whether or not full blown EVM (or even an "EVM light") is required. Depending on the nature and complexity/simplicity of your project you may be able to get the measures you're after without any EVM implementation at all - and that's coming from a staunch EVM advocate!


COST & SCHEDULE ALIGNMENT


Cost-Schedule alignment can be obtained in many ways and you don't necessarily need EVM to achieve this; EVM adds the additional dimension of Earned Value - more on that later. You can obtain cost and schedule integration by ensuring that your cost forecasts line up with the dates on your outstanding work packages and that your actual costs relate to completed work as reflected in the project schedule.


In practice you may want cost-schedule alignment to be more stringently controlled via bespoke software tools and systems; or you might want it more loosely applied via an excel spreadsheet. Software planning tools like Primavera or Microsoft Project along with the likes of Deltek Cobra or similar can be set up to give you a more robust system or, as mentioned, you can achieve simple cost-schedule alignment by creating an Excel spreadsheet with the desired layout and functionality. Again, neither is necessarily incorrect, you need to decide how robust your system and integration needs to be at the outset in order to decide on your level of integration.



PROJECT COST PROJECTIONS


While an EVM system will give you a very integrated system for cost projections on your project, it may be overkill to implement EVM if you aren't going to use all of the metrics that it can provide. You may even end up hindering project delivery more by implementing EVM than if you didn't as you may distract Project Managers from delivery by creating a need for them to explain every metric, variance and KPI.


However, if you have a mature enough organisation that appreciates and understands how to use EVM data to make informed decisions the advantages and insights you'll get will greatly benefit delivery; in some cases forecasts are more accurate and the data trends allow you to mitigate delays and overspends before it's too late.


VARIANCE AND BASELINES


In EVM, where we typically look at the CPR Format 1 report, when we talk about Cost and Schedule variances. Actual Costs (or ACWP) and Planned Value (or BCWS) are measured in comparison to Earned Value (or BCWP). Earned Value is obtained using various Earn Value Types (or techniques) to measure progress on activities which roll up into work packages and control accounts. If you want to measure true performance* then I would always advocate using EVM but it isn't always needed. (* performance measure is only as good as the baseline, more on that below)


Instead of EVM, you could apply a cost and schedule baseline (as long as they are set in alignment and at the sane point in time) and draw similar conclusions to EVM (which will in all likelihood have less detail and accuracy). You could then measure actual costs against this baseline spend profile and total cost projections against the original cost budget baseline. You could also set up schedule milestones and a Baseline Execution Index to give you a measure of schedule performance. Using this data you could potentially make the following assumptions:


  • Spend on track, Forecast on track, Schedule on track = project on track

  • Spend behind, Forecast under, Schedule on track = on time, under budget

  • Spend behind, Forecast on track, Schedule on track = on time, on budget but cost and schedule not aligned

  • Spend behind, Forecast on track, Schedule behind = late, on budget

  • Spend behind, Forecast over, Schedule behind = late, over budget

  • Spend on track, Forecast over, Schedule on track = on track, future work will cost more than budget

  • Spend ahead, Forecast on track, Schedule ahead = early delivery, on budget

  • Spend ahead, Forecast over, Schedule ahead = early, over budget

  • Spend ahead, Forecast under, Schedule ahead = early, under budget


Again, I must stress that I would always where possible implement EVM.



When it comes to baselines, you need to first ask yourself what baseline you want to measure. Some companies are heavily focused on financial data and this will drive annual baselines which align to yearly budgets. If this is your primary driver, then you are in effect rebaselining your projects every year. This means that your historical data becomes redundant and you lose history.


My advice is to keep financial accounting and project accounting separate as this will lead to improved project delivery. If I was a project manager working in a business where my project is rebaslined every year I wouldn't be as concerned about project performance compared to if I had a properly implemented project management baseline.


For me, a project management baseline is a cost and schedule baseline that is set against the original scope, timescales and budgets; and only altered through change control. In my opinion if you have this in place, as opposed to if you are setting annual baselines, then you have a far better chance of delivering projects on time and ultimately being more profitable - which is generally the ultimate business goal.


OK, stop jabbering on Dale....


There is a lot more I could go into on this but that is best saved for our podcasts. In summary, implementing EVM depends on a host of factors and you need to determine upfront whether the investment is worth the return. Do not implement EVM blindly but if you can your projects can only benefit!


#EVM #EarneValue #Baselines #Cost #Schedule #Budgets #Primavera #MSProject #DeltekCobra

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