Minimum Concepts for Earned Value Management

Over the years, I've been involved in a broad range of discussions, implementations, surveillance's, and deployments of Earned Value. In my heart of hearts I'm an "earned value guy."

There are just as many misunderstandings about earned value as there are successful implementations. Some of this comes from lack of knowledge, some from intentional misrepresentations of the facts, and others from simply not understanding the core concepts.

The Four Core Requirements For Earned Value^†

Before delving into the subtleties of EV (and there are subtleties), let's look at the four basic requirements for any earned value management deployment. I'd content these four items are the critical success factors for any project performance measurement system. This is why EV (as a concept) is the best approach to measuring performance of projects.

1. A credible schedule of the planned work
2. A time phased budget for the planned work
3. A means of collecting progress to plan of the work performed
4. A means of collecting cost information for the work performed

With these four capabilities, you've got all you need to apply earned value to any project, in any domain, and any context in that domain.

† These notions come from The Earned Value Management Maturity Model^®, Ray W. Stratton, Management Concepts, 2006.

What's a Credible Schedule Look Like?

• Margin for both cost and time
• Has an identified critical path. Probably several critical paths.
• Has identified "near critical paths"
• Shows all the deliverables in clear and concise descriptions of "Done"
• Is derived from the Work Breakdown Structure (WBS)

What's a Time Phased Budget Look Like?

• Budget is assigned to the work effort
• Management reserve is defined and held by the proper person(s)
• Budget is connected to labor
• Budget is connected to materials and other non-labor elements of the work

How do we Collect Progress to Plan?

• The only REAL way to measure progress to plan is to measure Physical Percent Complete for the work delivered at the planned delivery date
• Apportioned milestones can be used as well. 25% on the planned date for a set of deliverables that have agreed to represent 25% of the physical progress.

How do we Collect Cost Information?

• Can you say time card. A time card for each WBS element at the WBS level where costs are collected.

That's it. That's all you need in principle for Earned Value. There are other activities, 32 in all, for a full blown EVM System. But these four principles are the core activities for measuring project performance with Earned Value.