In my previous article, I discussed the importance of a baseline, and how, without one, a PM doesn’t have a yardstick, per se, to measure with. Project Management presents many tools and techniques for the management of a successful project. Today, I’d like to continue this conversation on how to achieve success in a project by going back to another basic concept: Earned Value Management (EVM).
EVM as a tool that provides visibility into whether or not you’re on track to finish your project within the established cost and timeline baselines defined in the project plan. In other words, EVM helps you quantify the performance of a project. It compares costs and schedules to a baseline to determine if the project is on track.
Some basic terminologies are frequently used when considering EVM, and every PM needs to be aware of them. Let’s define such using PMI as our guide:
- Earned value (EV) is the measure of work performed, expressed in terms of the budget authorized for that work. EV can be reported cumulative to date or for a specific reporting period.
- Planned Value (PV) is the authorized budget assigned to scheduled work, the total budgeted cost of the planned work. At any point in time PV defines the work that should have been accomplished. PV can be reported for cumulative to date or for a specific reporting period.
- Actual Cost (AC) is the cost incurred while performing the activity or cost of work performed on an activity during a specific time period. This can be reported cumulative to date or for a specific reporting period (on a cash flow basis or an S-Curve).
Earned Value Analysis is a project management technique for evaluating how a project performs against its budget and schedule, but to reap the benefits of it, project managers must spend a considerable amount of time determining a reasonable budget and setting realistic time frames.
Spending time defining the scope statement, breaking down the scope into manageable components (WBS), creating a logically driven project schedule with a critical path, and preparing a performance measurement baseline (budget scope) will lead you, as a PM using EVM, to answer three key questions: where have we been, where are we now, and where are we going?
EVM in Microsoft Project
Microsoft Project as a tool can help project managers to perform Earned Value Analysis and Earned Value Management for their projects.
MS Project 2019 Professional, as well as its earlier versions like MS Project 2016 and MS Project 2013, fully support EVM. Microsoft Project has built-in fields for all EVM measurements and can be calculated at any point of time in the project life cycle. We need to remember to check that we have a solid project schedule, baseline, resources rates, and updated accurate actual data to get the maximum from Microsoft Project’s EVM feature.
I look forward to starting a series of articles on how to use EVM in Microsoft Project, including best practices. I intend to cover the following in upcoming publications on MPUG:
- Understanding Earned Value fields
- EVM Project Case Study
- EVM Reports
To understand truly that ‘time is money,’ you need to use EVM in your projects. Comments or questions I might cover in my upcoming articles are welcome below.