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What is EVM?
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2
How to calculate EVM metrics?
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3
How to analyze EVM variances?
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4
How to forecast EVM outcomes?
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5
How to use EVM charts?
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Here’s what else to consider
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As a project manager, you want to know how well your project is performing in terms of cost and schedule. One of the most widely used methods to measure project progress is earned value management (EVM). EVM is a technique that compares the planned value, the actual cost, and the earned value of the work done at any point in time. In this article, you will learn how to use EVM to calculate key performance indicators, analyze variances, and forecast future outcomes.
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1 What is EVM?
EVM is based on the principle that the value of a project is equal to the amount of work completed. By measuring the work done against the planned baseline, you can determine how much value you have earned and how much you have spent. EVM also allows you to compare the earned value with the actual cost to see if you are over or under budget. EVM requires three basic inputs: planned value (PV), actual cost (AC), and earned value (EV).
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2 How to calculate EVM metrics?
To use EVM, you need to calculate four key metrics: cost variance (CV), schedule variance (SV), cost performance index (CPI), and schedule performance index (SPI). These metrics inform you how much you are deviating from your budget and schedule goals. The formula for CV is EV minus AC, while SV is EV minus PV. CPI is calculated by dividing EV by AC, and SPI is EV divided by PV. A positive CV or SV indicates that you are ahead of your budget or schedule, while a negative CV or SV means you are behind. A CPI or SPI greater than 1 implies superior performance than planned, and a CPI or SPI less than 1 signifies poorer performance than planned.
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3 How to analyze EVM variances?
Once you have calculated the EVM metrics, you can use them to analyze the variances in your project performance. Variances are the differences between the planned and actual values of your project. You can use the CV and SV to identify the root causes of the variances and take corrective actions. For example, if you have a negative CV, it means you are spending more than you have earned, which could be due to inefficient processes, poor quality, or scope changes. If you have a negative SV, it means you are behind schedule, which could be due to delays, dependencies, or resource constraints.
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4 How to forecast EVM outcomes?
Using EVM to forecast the future outcomes of a project is another benefit. The CPI and SPI can be used to estimate the final cost and duration of the project. Common formulas for forecasting include Estimate at Completion (EAC) which is calculated by BAC divided by CPI, Estimate to Complete (ETC) which is EAC minus AC, Variance at Completion (VAC) which is BAC minus EAC, and To-Complete Performance Index (TCPI) which is (BAC - EV) divided by (BAC - AC). EAC is the expected total cost of the project, BAC is the original budget at completion, ETC is the remaining cost to finish the project, VAC is the expected difference between the budget and the final cost, and TCPI is the required performance level to meet the budget.
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5 How to use EVM charts?
One of the best ways to visualize and communicate your EVM data is to use charts. There are two main types of EVM charts: S-curves and performance indices. S-curves are graphs that plot the cumulative values of PV, AC, and EV over time. They show the progress and trends of your project in terms of cost and schedule. Performance indices are graphs that plot the values of CPI and SPI over time. They show the efficiency and effectiveness of your project in terms of cost and schedule.
EVM is a powerful tool that can help you measure, analyze, and forecast your project progress. By using EVM, you can track your project performance against your baseline, identify and address variances, and predict future outcomes. EVM can also help you communicate your project status and performance to your stakeholders and team members.
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6 Here’s what else to consider
This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?
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