PROJECT & COST MANAGEMENT

Project & Cost Management

Project & Cost Management

Earned Value Analysis

(Earned Value Analysis) EVA requires project managers to track project actual start and finish dates while comparing actual costs to the project baseline. By taking up EVA on your tasks, you will strengthen good task administration principles (Christensen 2008). This production presents an informative overview of the process.

In addition to assessing any slippages or cost overruns in a project in general terms, Earned Value Analysis (EVA) can be used to help determine if a project is providing value for money or not. EVA concentrates on three basic parameters: How much work SHOULD have been done so far (BCWS); how much money has ACTUALLY been spent to progress the project so far (ACWP) and what the VALUE is of work that has been accomplished so far (BCWP). By comparing these values, assessments can be made about how efficient a project is and where problems may lie (Project Management Institute 2000).

Earned Value Analysis (EVA) was developed by the US Department of Defence to determine the performance of large military procurement contracts. Indeed, as Microsoft Project allows you to drill down through and across a project, specific variances and general trends can be easily found.

Earned value analysis is a method of performance measurement. Many project managers manage their project performance by comparing planned to actual results (Mulcahy 2001). With this method, one could easily be on time but overspend according to the plan. A better method is earned value because it integrates cost, schedule and scope and can be used to forecast future performance and project completion dates. It is an “early warning” program/project management tool that enables managers to identify and control problems before they become insurmountable. It allows projects to be managed better - on time, on budget.

By comparing these parameters, an objective assessment of cost AND schedule performance can be gained (Fleming 2009). Instead of simply concentrating on how much time has been taken to achieve progress, earned value looks at how much value has been achieved so far. For example, take the following project summary task:

This project started on time, but it is currently expected to finish 5 days late.

This project is expected to overspend by $1,280 - approximately 13% greater than its baseline cost.

Whilst this may appear to be adequate information, greater insight into the project's status can be gained by looking at its earned value ...