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| Earned Value Management | |
|---|---|
| Name | Earned Value Management |
| Field | Project management |
| Introduced | 1960s |
| Organizations | Project Management Institute, United States Department of Defense, NASA, European Space Agency, International Organization for Standardization |
Earned Value Management Earned Value Management (EVM) is a project performance measurement technique that integrates scope, schedule, and cost for forecasting and control. It originated in the 1960s within United States Department of Defense programs and later spread through standards by Project Management Institute, NASA, and International Organization for Standardization. Practitioners apply EVM across major projects such as Apollo program, International Space Station, Crossrail, and Channel Tunnel to provide objective performance indicators for stakeholders like Congress of the United States committees, corporate boards, and auditors.
EVM combines planned work, actual work, and actual costs to produce indicators that support decision making in projects similar to those run by Boeing, Lockheed Martin, Siemens, Bechtel, and Fluor Corporation. It traces lineage to management practices used in programs like Manhattan Project and was formalized in standards by bodies such as National Aeronautics and Space Administration and United States Department of Defense acquisition directives. Large infrastructure programs like Big Dig (Boston) and international endeavors such as Panama Canal expansion have employed EVM variants to manage risk reported to entities including World Bank and European Investment Bank. EVM reports often inform oversight by committees like the Government Accountability Office and influence procurement rules in countries such as United Kingdom and Australia.
Core principles include baselining scope via a work breakdown structure used by firms like Arup Group and Jacobs Engineering Group, assigning budgeted value to tasks as in programs from Rolls-Royce Holdings and aligning time-phased plans like those in Siemens projects. Concepts include planned value, earned value, actual cost, schedule variance, and cost variance; these are used in audits by KPMG, PricewaterhouseCoopers, Deloitte, and Ernst & Young. EVM requires clear control accounts, often coordinated by program offices similar to those in NASA or United States Department of Defense programs, and governance comparable to boards of BP or Shell plc overseeing megaprojects. Integration with change control resembles practices codified in ISO 21500 and procurement rules like those of the European Commission.
Key metrics include schedule performance index and cost performance index, calculated from values analogous to those used in analyses by McKinsey & Company and Boston Consulting Group. Formulas use baseline metrics to compute estimates at completion and variance at completion, similar to forecasting techniques in reports by International Monetary Fund and Organisation for Economic Co-operation and Development. Metrics support earned schedule interpretation that has been discussed alongside methodologies from Agile Alliance and frameworks adopted in enterprises like IBM and Microsoft. Analysts crosswalk EVM outputs with cash flow models used by Goldman Sachs, JPMorgan Chase, and Morgan Stanley when advising capital-intensive projects.
Implementation follows processes such as project planning, baseline development, performance measurement, and variance analysis, implemented by program management offices in organizations like Northrop Grumman and Raytheon Technologies. Successful adoption often requires training programs similar to those offered by Project Management Institute chapters, change management like that seen in General Electric transformations, and compliance checks analogous to audits by United States Government Accountability Office. Integration with contracting strategies mirrors approaches used by McDermott International and KBR, Inc., and rollout often aligns with portfolio governance as practiced at Siemens AG and ABB Ltd.
Commercial tools for EVM include modules in enterprise suites from Oracle Corporation, SAP SE, and Microsoft Corporation Project Online; specialized products are offered by vendors like Deltek and Primavera Systems (now part of Oracle Corporation). Open-source and niche tools integrate with systems used by Atlassian and Red Hat, while analytics are supported by platforms from Tableau Software and SAS Institute. Large contractors embed EVM in ERP systems provided by Honeywell and Schneider Electric to report to stakeholders such as Department of Energy (United States) and Ministry of Defence (United Kingdom) equivalents.
EVM is applied in aerospace projects like Apollo program and Space Shuttle program, defense procurements for F-35 Lightning II and Arleigh Burke-class destroyer programs, infrastructure projects such as Crossrail and High Speed 2, and energy sector projects including Three Mile Island decommissioning and Gulf of Mexico oil development programs. Financial institutions like World Bank and Asian Development Bank encourage EVM-like reporting on funded projects, while multinational firms such as ExxonMobil and TotalEnergies use EVM for capital projects. EVM also appears in IT transformations at Amazon (company), Google LLC, and Facebook, Inc. parent companies where schedule and budget integration is critical for stakeholder reporting to boards like those of Apple Inc..
Critics from academia and practice—represented by scholars at Harvard University, Massachusetts Institute of Technology, Stanford University, and London School of Economics—point to limitations including sensitivity to baseline quality, difficulties in measuring intangible scope in projects like The Human Genome Project, and misinterpretation of indices in innovative programs such as DARPA initiatives. Auditors from Government Accountability Office and consultants at McKinsey & Company note implementation costs, potential for gaming metrics in organizations like Enron-era corporations, and challenges integrating with agile methods promoted by Scrum Alliance. Reform advocates cite alternative approaches from Lean Thinking proponents at Toyota Motor Corporation and risk-based techniques used by International Risk Management Institute.