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Initial post week 5
The Earned Value Management (EVM) is a controlling method in which key figures are calculated with the help of planned and actual data, which evaluate the project progress in terms of costs, time and scope of services. In addition, the EVM provides forecasts for the projected project end and projected project costs. The most important basis of calculation of the key figures is the so-called earned value, which is determined from the sum of the planned expenses for the scope of services provided on a particular key date. The three different earned value definitions defined in the EIA standard all have their own meaning, which the PMBOK has also adopted.
“The earned value of work achieved (value completed) for those tasks in growth is found by growing the projected percent physical accomplishment of work for each task by the strategic cost for those tasks”( Meredith and Mantel, 2014, P. 439).
The core of EVM is the earned value itself. Without determining the earned value, you cannot use EVM with all its metrics. The key figures that subsequently calculate from the EV, AC and PV are then important to determine the state of the project / subproject or work packages.
One could consider many more interesting points of contact between risk management and project cost management. In particular, the project justification methods are based on the so-called cost-benefits analysis and come down to an analysis of the company's risk tolerance in financial terms for a project with different levels of profits and other benefits. At this point, however, we would like to interrupt the discussion about the cost characteristics of the project and move on to consider a somewhat non-traditional aspect of risk management - namely, the risks of the project schedule.
The acceptance for EVM is high in the Anglo-Saxon countries. However, it is also increasing in the European countries, among others, due to a higher acceptance of the PMBOK ® PMI and the sharp increase in certifications for PMP, but also because orders of the American Government to the European defense industry. With these, EVM is obligatory above a certain order size.
The Earned Value Methodology requires a clear definition of the work, deadlines, and effort required to provide an objective and realistic measure of the work done, and represents a true cost situation. Further, this method provides a basis for basic (management) Decisions and represents an approach for a company-wide uniform performance measurement for projects. Within the multi-project controlling comparisons between several projects are possible. While the earned value method does not allow monitoring and forecasting of quality and performance, it does provide information on project duration and costs through an integrated analysis of elapsed time and costs.
References
A Guide to the Project Management Body of Knowledge (2013) (5th ed.) Project Management
Institute, ISBN-13: 9781935589679
Meredith, J. R. and Mantel, S. J. (2014). Project Management: A Managerial Approach (9th ed.),
Wiley, ISBN-13: 9781118947029. Retrieve from
https://digitalbookshelf.southuniversity.edu/#/books/9781119128380/cfi/6/18!/4/2/14/20/6/2@0:0
Replies
Reply to Adam Alcon
Thank you, Adam, for your post and yes Brandon’s question is really important. The method is part of the Project Management Book of Knowledge (PMBOK), the American standard for project management, and is today the minimum standard for public projects in the United States. Basically, Earned Value Management represents a key figure-oriented approach to make the progress of a project measurable and monitorable at all times.
Reply to Brandon
Thankyou Bandon and your post is interesting and informative as always. The aim of the earned value method is to grant as objective an assessment as possible of the project performance at a certain point in the project process. To achieve this, the EVM provides an integrated analysis of costs incurred, past time and work performed.
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