An Earned Value Management System (EVMS) integrates the work scope of a program with the schedule and cost elements for optimum program planning and control. The primary purpose of the system is to support integrated program management. The system is owned by the organization and is governed by the organization’s policies and procedures. The principles of an EVMS are:
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Plan all work scope for the program to completion.
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Break down the program work scope into finite pieces that are assigned to a responsible person or organization for control of technical, schedule, and cost objectives.
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Integrate program work scope, schedule, and cost objectives into a performance measurement baseline plan against which accomplishments are measured. Control changes to the baseline.
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Use actual costs incurred and recorded in accomplishing the work performed.
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Objectively assess accomplishments at the work performance level.
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Analyze significant variances from the plan, forecast impacts, and prepare an estimate at completion based on performance to date and the remaining work to be performed.
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Use the EVMS information in the organization’s management processes.
The essence of earned value management is that a target planned value (i.e., budget) is established for each scheduled element of work at a level of detail appropriate for the degree of risk for the technical, schedule, and cost or uncertainty associated with the program. As these elements of work are completed, their target planned values are “earned.” As such, work progress is quantified, and the earned value becomes a representation of accomplishment against which to measure what was spent to perform the work and what was scheduled.
Schedule variances, which cannot be seen in a stand-alone budget versus actual cost tracking system, are isolated and quantified, and the cost variances are true cost variances that are not distorted by schedule performance. This provides for early identification of performance trends and variances from the management plan and allows management decision-making while there is adequate time to implement effective corrective actions. Without earned value, one can only compare planned expenditures with how much has been spent, which does not provide an objective indication of how much of the planned work was actually accomplished.
For the benefits of earned value to be fully realized, comprehensive planning at the outset, which includes a thorough risk and opportunity analysis, combined with the establishment and disciplined maintenance of a baseline for performance measurement are required. This combination of comprehensive planning, baseline maintenance, and earned value analysis yields earlier and better visibility into program performance than is provided by non-integrated methods of planning and control. This enhances overall program management value through decisions based on the use of EVMS information.
The intent is to provide management information using the organization’s resources and a properly scaled EVMS application that achieves the program requirements and is compliant with the EVMS principles. EVMS scalability is viewed as a spectrum employing the principles of EVMS as fundamental to all programs and the EVMS guidelines (see Section 2) as applicable to large, complex, or high-risk programs. This scalability allows any program, regardless of size and complexity, to realize the benefits of earned value management.
Complementary systems or methodologies such as systems engineering, cost estimating, manufacturing/enterprise resource planning (M/ERP), and Agile software development often interface with the EVMS. These complementary systems or methodologies deliver other functionality and value to the customer while earned value management provides a standardized method for measuring progress and contract reporting. The EVMS documentation should describe the system interfaces as well as the recurring control process to maintain data conformance and system compliance.