What is Earned Value Management?

Earned Value Management (EVM) is a project management technique used to objectively calculate the status of a project. EVM is able to deliver key metrics that can show you with quite amazing accuracy the status of the project budget and schedule.

You need however to have access to work log data in order to be able to calculate it, and a bit of math skills.

By the way, If you happen to use JIRA Cloud as a task management tool, please have a look at our automated tool for EVM reporting.

What Is the Data Input for EVM?

The Earn Value Management technique uses 4 important pieces of information: Budget at Completion, Actual Cost, Earned Value and Planned Value.

Below are some details about these metrics:

• Budget at Completion or BAC represents the original estimated total number of hours needed to complete the project.
• Actual Cost or AC represents the total number of hours the team spent so far executing the project.
• Earned Value or EV represents the completed work on the project. This value is calculated by summing up the original estimate of the closed tasks.
• Planned Value or PVrepresents how far along project work is supposed to be in the current period of time.

With these important values, a variety of metrics are calculated. I will briefly mention some of them below.

What are the metrics that EVM offer?

After applying the specific formulas for each metric, metrics like the ones below are available for your progress report. As a measurement unit, I will use hours.

• Cost Variance or CV shows by how much the project is under or over budget.
• Schedule Variance or SV shows by how much the project is under or over schedule.
• Cost Performance Index or CPIholds the same information as CV but displayed as an Index. If the index is greater than 1 then the project over budget. If the index is below 1 then the project is below budget.
• Schedule Performance Index or SPI holds the same information as SV but displayed as an Index. If the index is greater than 1 then the project is behind schedule. If the index is below 1 then the project is under schedule.
• Estimate to Complete or ETC shows the expected remaining number of hours to complete the project.
• Predicted Overrun or PO shows the amount of work that is estimated to go over budget. Usually this metric is displayed as a percentage.
• To Complete Performance Index or TCPI shows the performance index that needs to be maintained in order to meet the project budget.

 

Some other additional metrics are available as part of EVM. You can read more about Earned Value Management on Wikipedia.