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NASA EVM Tutorial: Project Management Component Circle

The document provides an overview of Earned Value Management (EVM), which integrates technical performance, resource planning, schedules, and risk. EVM allows project managers to compare planned work and budgets to actual work completed and costs incurred to evaluate schedule and cost variances. These variances provide objective measurements of project performance and enable forecasting of future projections. EVM is a valuable tool for project managers to gain insight and make effective decisions about minimizing adverse impacts and risks.

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89 views

NASA EVM Tutorial: Project Management Component Circle

The document provides an overview of Earned Value Management (EVM), which integrates technical performance, resource planning, schedules, and risk. EVM allows project managers to compare planned work and budgets to actual work completed and costs incurred to evaluate schedule and cost variances. These variances provide objective measurements of project performance and enable forecasting of future projections. EVM is a valuable tool for project managers to gain insight and make effective decisions about minimizing adverse impacts and risks.

Uploaded by

Amit Singh
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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NASA EVM Tutorial

Earned Value Management (EVM) is a program management technique that integrates technical performance
requirements, resource planning, with schedules, while taking risk into consideration. The major objectives of
applying earned value to a contract are to encourage contractors to use effective internal technical, cost and
schedule management control systems, and to permit the customer to rely on timely data produced by those
systems for better management insight. This data is in turn used for determining product-oriented contract
status, and projecting future performance based on trends to date. In addition, EVM allows better and more
effective management decision making to minimize adverse impacts to the project.

Project management component circle


Earned value provides an objective measurement of how much work has been accomplished on a project.
Using the earned value process, the management team can readily compare how much work has actually been
completed against the amount of work planned to be accomplished. All work is planned, budgeted, and
scheduled in time-phased "planned value" increments constituting a Performance Measurement Baseline
(PMB).
Let's look at a simplified example:

Baseline plan
The baseline plan shown in the above graph illustrates a task with a total budget amount of $240k, which is
planned for accomplishment over 24-month time frame. The "time-now" line shows that $100k of the project
resources was planned to be completed at this point in the project. Another way to look at this is that the project
was planned to be 41.6% complete ($100k / $240k) at this point in time.

As work is performed, it is "earned" on the same basis as it was planned, in dollars or other quantifiable units
such as labor hours. Comparing earned value with the planned value measures the dollar value of work
accomplished versus the dollar value of work planned. Any difference is called a schedule variance.
Earned Value - Planned Costs = Schedule Variance (SV)

NASA EVM Tutorial (Concluded)

Schedule variance chart


In our example the task was planned to have accomplished $100k worth of work in twelve months, but the real
accomplishment was only $60k. The graph shows a "behind schedule" condition. The schedule variance in
dollars would be a negative $40k, the difference between the earned value accomplished ($60k), and the value
of the planned work ($100k) to date. According to our formula then:
$60k - $100k = ($40k)
The value earned for the work performed compared with the actual cost incurred for the work performed
(taken directly from the contractor's accounting systems), provides an objective measure of cost efficiency.
Any difference is called a cost variance.
Earned Value - Actual Costs = Cost Variance (CV)
A negative variance means more money was spent for the work accomplished than was planned. Conversely, a
positive variance means less money was spent for the work accomplished than was planned to be spent.

Cost variance chart


From the performing organization's own accounting system, we determine the actual costs for performing the
$60K work was $110K.

When the actual costs are compared with the earned value of $60k, the difference is the cost variance. The
earned value of $60k less the actual cost of $110k, is a negative cost variance of $50k. In this example, the
task is in an overrun condition by $50k.
$60k - $110k = ($50k)
Analysis of these variances should reveal the factors causing the deviation from plan.
The Task Manager uses this information in conjunction with his knowledge of the task, to project an estimate to
complete for this task. The Task Managers analyzes variances resulting from comparisons of these five basic
data elements; planned work, work accomplished, actual costs, total budget at completion and the estimate at
completion. The work breakdown structure provides a useful framework for summarizing this performance
information for all levels of management.
Earned value improves on the "normally used" spend plan concept (budget versus actual incurred cost) by
requiring the work in process to be quantified. The planned value, earned value, and actual cost data provides
an objective, quantifiable measurement of performance, enabling trend analysis and evaluation of any cost
estimate at completion within multiple levels of the project.
EVM is a valuable tool in the Project Manager's "toolbox" for gaining valuable insight into project performance
and is the tool that integrates technical, cost, schedule and risk management. In addition, EVM provides
valuable quantifiable performance metrics for forecasting at-completion cost and schedule for their project.

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