Abstract
EVM is such a tool in project management that involve statistical calculations. Therefore, most the project managers try to avoid this tool. But once you understand the technicalities of this tool and learn how you can use this, EVM is not as difficult as it seems. EVM helps to understand the project progress. Analyze the performance and also helps you in the forecast perdictions. It helps to track the progress of the project i.e., actual and planned.
Earned value management Impact on project Performance
Introduction
Earned value management was an idea that emerged in 1966 and become and elementary subject to project management (Blanton, 2016). It is a tool that measures the progress and performance of the given project. Project management triangle has three components that are time, scope and cost and this earned values management can assess the values of all these three.
Eanrned value management is able to give proper and accurate figures about all the three components that will help the manager and the client to understand about the progress of the project. Recent research shows that earned value management’s principles are the indicators about the success of the project. In the past few years, the importance of EVM has grown in the state departments because big public project include a lot of finances and government also make sure that the project end s on time because delaying on such big projects wll cause them extra money to spend. In addition, there are a lot of corruption allegation and a lot of disputes between different parties which can be monitored and verified through EVM.
Discussion
Earned value management was emerged as a financial analysis tool by the government of United Staes of America but soon it became an essential part of all the projects that were been govern by the US government (Walt Lipke, 2009). It helped a lot in project and cost management. This tool is designed bin such a way that in can cater all types of projects regardless of their size.
Application Example: Project xyz has been assigned to a company abc by the government. It was said at the initial meeting that the project should be completed in the goiven period of time that is 2 year. But both the company and the government agreed upon the condition that half of the budget must be spent in the first 6 months after the project is started. When the project manager delivers the report after 6 months, it says that 50% of the project has been spent but the work done in the first 6 months of the project is 25% of the total. This eport shows that the project is not working well as for the remaining 75% work there is only 50% of the total budget is available. But if the report says that 75% work is completed in the first 6 months while using only 50% of the total budget then it is good sign and shows that the project od working well. EVM has been designed to cater all such issues. Through EVM you can pan your project in a better way.
There are 3 basic components of EVM (Javier Pajares, 2011). That are:
- Planned Value: It is also known as the estimated cost of the project. This cost is budgeted for the work that shoud be done in the given period.
- Earned Value: It is also known as the amount that you earn by completing your project in the defined period.
- Actual Cost: It is the actual amount of money that has been spent to complete the task.
Forecasting with Earned Value Management
Projects can be forecasted with the help of EVM. Foloowing can be forecasted through EVM (Young HoonM, 2009):
- Estimate at completion: As the project goes on, there come a lot of problems due to which sometimes project delay. Due to which the estimated cost of the project increases. EAC is the forecasted or expected cost of the a given project with the passage of time.
- Estimate to complete: It is the estimated amount that is required to complete the project from a given point of time.
- Variance at completion: This term tells you at the completion of the project about how much money you have spended over your budget or much money you have saved.
Benefits of Earned Value Management
EVM provides a lot of benefits to the organizations, sponsore, project managers and to the clients as well. EVM provides better command over the components of the projects that are cost, time and scope. With the help of EVM, one can easily find out the glichtes in the project at the initial stage and resolve that problems proactively. It gives a clear insight about the project to the client makes him confident that his project would be a success. It helps you to calculate the remaining period of the project with the help of which you can calcilate the expected cost. With the help of EVM you can easily identify the areas in which you can face risks in the future.
References
Kwak, Y. H., & Anbari, F. T. (2009). Analyzing project management research: Perspectives from top management journals. International Journal of Project Management, 27(5), 435-446.
Lipke, W., Zwikael, O., Henderson, K., & Anbari, F. (2009). Prediction of project outcome: The application of statistical methods to earned value management and earned schedule performance indexes. International journal of project management, 27(4), 400-407.
Lipke, W., Zwikael, O., Henderson, K., & Anbari, F. (2009). Prediction of project outcome: The application of statistical methods to earned value management and earned schedule performance indexes. International journal of project management, 27(4), 400-407.
Schwalbe, K. (2015). Information technology project management. Cengage Learning.
