ADOPTING RIGHT-SIZED EVM TO DRIVE
PROJECT PERFORMANCE
98% of large-scale projects face cost
overruns or delays, and the average cost
increase is 80%.
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| WHITE PAPER
A recent McKinsey report estimates that 98 percent of largescale projects face cost overruns or delays, and the average
cost increase is 80 percent1. With the complexity involved for
such projects, it’s far too easy for stakeholders to discover
that their budgets are underwater only after it’s too late to
make a difference. But suppose there was a way to reliably
predict when a project was going to finish, and how much it
was going to cost, at less than 20 percent of the way in? This
is the extraordinary, under-hyped ability of Earned Value
Management (EVM).
EVM often gets a bad rap. It’s surrounded by stories of rigid,
costly, and unsustainable implementations that belie both
its true value and the necessary requirements. In particular,
Earned Value Management often gets conflated with the
rigorous EIA-748 standard used by U.S. government agencies
and contractors. Project controls professionals, executives,
and other interested parties tend to assume that any
implementation of EVM methodologies must be complex
and extensive, generating unwelcome additional costs, and
creating tedious processes that would ultimately
be unsustainable.
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The reality is that the EIA-748 standard merely represents an
This paper will explain the core principles of EVM and
extreme end of a wide spectrum of possible configurations
identify best-fit approaches to implementing those
that leverage some highly useful methodologies. Earned
principles. Project management professionals should be able
Value Management is, at its core, a productive method
to use this information to demonstrate that an EVM system
of doing what project controls professionals already do:
can be successfully executed within their organization, thus
analyzing cost and schedule data to improve project
convincing executives and decisionmakers that EVM isn’t a
performance.
process they should be wary of but rather something that
The application of EVM can be flexible, varying in rigor based
should be a part of their overall project management plan.
upon the needs of a project or organization. An effective
Topics to be reviewed include: foundational data required
EVM implementation, optimized for an organization’s needs,
for EVM; creating a fit within organizational culture and
can provide ideal insights into productivity and cost and
processes; data integration to drive Key Performance
schedule forecasts for those in a stakeholder or executive
Indicators (KPI) and metrics; different uses and adoption of
role. Provided as summaries, graphics, and drilldown views,
EVM in select industries; and applying the “right” amount
this information can allow senior managers to roll up earned
of EVM.
value across projects, whether it’s for a single portfolio
or a division of their organization, to provide insight into
enterprise-wide performance.
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The Advantage of EVM
In simplest terms, Earned Value (EV) is progress expressed
1. How much have we completed so far?
as a monetary amount: the overall percentage that a project
2. Are we on schedule?
is complete, multiplied by the total budgeted cost. For
3. Are we within budget?
example, a $1 million project at 50 percent completion has
an earned value of $500,000. Earned Value Management
Implemented in an organization, EVM can provide a set
is the methodology of applying EV to measure, forecast,
of guidelines, metrics that can trigger alerts at various
and improve projects performance. Earned Value can be
thresholds, alerting project managers or other users to take
compared against the schedule, cost actuals, and other
information to answer critical project controls questions:
corrective action on a project.
Key Inputs For
EARNED VALUE MANAGEMENT
PV
AC
EV
PLANNED VALUE
ACTUAL COST
EARNED VALUE
EVM answers the questions: have we got to where we
want to be in the project? and when are we going to
finish this project?”
APMG International
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Visualizing Progress
A number of methods exist to track progress, percentage
Variance measurements are typically calculated in the form
complete, within a project: milestones, schedule driven,
of an Index, where a measurement that exceeds a given
50/50, and so on. With a decent calculation of progress, EVM
threshold can signal problems worthy of attention.
can turn a percentage complete into a clear picture of how
• Cost Performance Index (CPI): EV/AC. If Earned Value is
that status measures against what was initially planned.
$90 and actuals are $100, CPI is 0.9
It provides an answer to the question, “So, is 45 percent
• Schedule Performance Index (SPI): EV/PV. If Earned Value
complete good?”
is $110 and Planned Value is $100, SPI is 1.1
Consulting the schedule to determine work scheduled
The true benefit of EVM here is that it allows the user to
Planned Value (PV) and compare it to Earned Value. If EV
understand the distinct relationship between cost and
< PV, the project is behind schedule. If EV > PV, the project
schedule to a project, allowing more informed decision
is ahead of schedule. EV can be compared against actual
making and, with regular project updates, allowing the
costs (AC) in a similar fashion to determine whether project
user to distinguish between minor, expected fluctuations
costs are exceeding the budgeted amount. In the somewhat
in a project and discrepancies that deserve attention. In
exaggerated example below, the project is behind schedule
the example above, you can see that actuals diverted from
and is also accumulating higher-than-expected costs to get
the predicted curve very early on, and evaluation of the CPI
less done.
would have identified the problem at that point.
Cumulative Cost
for completion by a specific date, you can determine the
BAC
A
ct
st
Co
l
ua
ed
nn
a
Pl
e
lu
Va
)
(EV
e
u
l
Va
ed
n
r
Ea
Schedule
Variance
Right Now
Cost
Variance
Time
Figure 1: Cost and Schedule Variance
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Predicting Accurately
EVM has proven to be a highly effective predictor based on
past performance, so capturing this information provides a
valuable tool for forecasting and serving as an early warning
system throughout the project lifecycle. In fact, at 20 percent
completion, EVM methods can be applied to a forecast that’s
accurate within ± 10 percent of final project costs.
As the illustration below demonstrates, forecasts can
be built based on CPI and/or SPI to create an estimate at
completion (EAC), which in turn is compared to the planned
budget at completion (BAC).
Better Scope Definition
The U.S. Department of Defense surveyed more than 500
contractors and program managers, and more than 70
percent agreed that a major benefit of EVM methodology is
Cumulative Cost
more thorough planning.
EAC
Variance at
Completion
BAC
Projected
Delay
A
ct
st
Co
l
ua
ed
nn
e
lu
Va
Pl
a
)
EV
e(
u
l
a
dV
ne
r
Ea
Right Now
Time
Figure 2: EVM Forecasting
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Common EVM Misperceptions
EVM is surrounded by misconceptions that hinder its
compliant system imply a laborious level of detail that must
adoption. While executives may be aware of the benefits
be recorded and tracked to ensure an accurate measure of
associated with EVM, they are relayed stories of rigid, costly,
earned value. Organizations new to EVM, or with immature
and unsustainable implementations that provide a false
processes, would find this level of detail very burdensome.
understanding of what is actually required.
An EVM system relies on employees to accurately indicate
Possibly the most significant misconception is the frequent
conflation of EVM with the rigorous systems designed to
comply with the EIA-748 standard, which is often mandated
by government agencies and contractors on projects of a
significant size. Interested parties assume that a particularly
complex type of EVM process must be implemented by any
organization and may avoid implementing EVM altogether,
fearing the cost and effort needed to fulfill the level of
times of productivity to measure progress. Within this data
capturing struggle, many find themselves in a minefield of
information, having to record data from different sources.
Human error becomes a greater risk with this type of
reporting. However, there are less cumbersome ways to
collect data and it is not necessary to begin collecting
data at a much greater level of detail if that detail does not
actually provide valuable information.
rigidness and the extensive tracking details prescribed
Another obstacle voiced by many is the unfamiliar
by EIA-748.
terminology and formulas necessary to execute Earned
The overhead expense – in both financial and labor
resources – stemming from the implementation of an
Value (EV) metrics, making it difficult to train employees and
difficult to translate findings for executive consumption.
EVM system is an understandable concern for any kind of
All of these concerns have hindered the support project
organization. Undertaking an added (and potentially very
management professionals garner for the implementation
costly) expense for performance measurement is often
of an EVM system within their organization. However, there
looked upon as an unwelcome additional cost, rather than an
is a way to make EVM applicable, practical, and actionable
investment leading toward cost reduction.
so that the concept is not only approachable, but also of
The sustainability of the EVM process has also been a cause
for concern. Again, the requirements of an EIA-748
interest for executives and decision-makers within an
organization, and not just practitioners of project controls.
EVM is not a goal
unto itself. The key
selling point, instead,
is delivering improved
performance.
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Encourage executives to want
to look closer at the metrics and
actionable insights. Don't talk
about CPI and SPI, but instead
talk about 'productivity.'
Selling EVM to Executives
The perceived complexity and difficulty of implementing
Additional value from EVM is unlocked when an organization
EVM detracts from the appreciation of its value as a
is able to view EV from an enterprise or program portfolio
business tool for effective decision making. The insights
perspective. An organization that can roll-up EV generated at
EVM generates are ideal for the executive level, but must
the project level to provide broader insights at higher levels
be positioned in a way that makes EVM accessible and not
of detail gains the benefit of visibility into enterprise-wide
something solely for the “back office” of project controllers.
performance. The consolidation of all the data, measured
An effective, modern EVM system provides project
and tracked, and viewable from one platform, becomes
information through summaries, graphics (reports and
critical in providing metrics to decision-makers who need
dashboards), and drilldown views to support the summarized
streamlined information at an actionable level to improve
information. These tools can allow senior managers to
project performance not just of specific projects, but of the
roll up EV across projects, whether it’s a portfolio or
enterprise as a whole. Consider the value of looking at all of
a division of their organization to provide insight into
the contractors or sub-contractors’ work aggregated across
enterprise-wide performance.
all projects and rewarding the ones that are consistently high
A key component of executive adoption of EVM is to
performing with more work.
streamline technical terminology. Instead, use descriptive
Once decision-makers are convinced of the value of EVM
information that delivers the point in a more approachable
and supportive of the initiative, EVM can succeed within
way. This approach can encourage executives to want to
an organization. To reiterate, discarding unnecessary
look closer at the metrics and actionable insights they can
complexity and using an appropriately designed approach
reveal about project execution. EVM can succeed with
which fulfills the minimum level of detail and rigor needed for
executive buy-in. For them, however, EVM is not a goal unto
an organization is the goal.
itself. The key selling point, instead, is delivering improved
performance. Don’t talk about CPI and SPI, but instead talk
about ‘productivity’.
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Foundations of EVM
EVM exists within an organization’s project management
some projects may require this level of precision reporting,
lifecycle, building upon a solid project controls framework
it can be cumbersome and costly. Progress measurement
by adding process standards and performance metrics.
with this level of detail will not work for many projects. With
EVM is tightly integrated into the existing project controls
complex projects, sometimes there is simply too much data
foundation, as it depends on vital project data as pillars to
or too many different departments are involved to safely
support its implementation. Before attempting to harness
track measurement without error. Understandably, there
the power of EVM, an organization must first evaluate its
can be opposition to this process if the project is relatively
readiness to deliver the following fundamental elements:
simple and does not require that level of rigor.
Instead, simpler methods can be used to determine
Scope
As mentioned above, the foundation of EVM is comparing
work completed against work planned. To effectively
calculate earned value for a project, an organization must
clearly understand the scope of work to be done. A clear
scope starts with a well-formed work breakdown structure
(WBS). The challenge in developing the WBS is to find the
correct level of detail to capture. Organizations can make
progress, for example:
• Defining rules of credit, such that a certain percent
complete is marked on a task based on specific
milestones achieved
• Self-reporting of percent complete by contractors or
subcontractors
• Progress based on physical work accomplished (e.g.
having laid 10 miles of piping on a 20-mile project yields
50 percent complete).
the mistake of thinking that more detail is always better,
but too much detail can create an unwarranted burden.
Don’t track detail simply because it’s possible. When a
level of detail no longer adds value to project management
or decision making, it can be left off the WBS. In fact, it’s
recommended that any organization implementing an EVM
approach should err on the side of less detailed rather than
more detailed.
Actuals
Measures such as cost variance and schedule variance
will require actual cost data to be used for an accurate
EV reading. These real-time measurements, whether they
come from a commercial enterprise resource planning
(ERP) system or any internal cost tracking system, are vital
in measuring earned value.
Budget Over Time
EVM compares work completed against work planned,
so the next step is creating a time-phased budget for the
project, to determine when these costs will be paid. Time
and budget work together to give you a benchmark that you
will measure against to determine Earned Value.
Effective Change Management
To be truly effective, an EVM solution must integrate
change management. Throughout the life of a project, there
will be changes and unforeseen events. A methodology
to identify, approve, and allocate funds to address these
changes should be inherent within the EVMS. Changing
Progress Data
Similar to scope, measuring progress at too fine a level
can be problematic. This is an area where the perceived
overhead involved with EVM can be disconcerting.
budgets within a separate system would be a waste of time
and resource. Tools should support initiating, reviewing,
and approving budget change requests, pulling information
for distinctive contingencies; and outlining the justification
required in change management.
Certainly, progress can be measured by tracking all the
activities of all resources assigned to all tasks applied
against a project’s WBS. While
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Capabilities Derived from EVM
What capabilities and information should an organization be
4. Ability to track trends over time. Typically, this is
striving for through EVM? The following describes five key
understood to mean performance to date, but ideally this
areas that EVM should be delivering:
capability will extend to looking at trends over different
1. Ability to compare performance against performance
baselines. One must be able to understand how our
current performance differs from the original budget, the
times as well. How has performance changed recently (e.g.
the past month or quarter on a multi-year project) and
does this show a more appropriate trend?
current budget, the current forecast, etc. and importantly,
Drive changes in behavior. As initially stated, one of the
answer why.
principles of EVM is to improve performance. As such, it
2. Ability to forecast Estimate At Complete (EAC) and
Estimate To Complete (ETC). Inherent in these measures is
a clear understanding of what has been spent so far and
the current status of the project in question.
should reveal trends or warning signs to be addressed. This
information should be delivered to the individuals within the
organization that can make business decisions and shape
the course of a project for the better.
3. Ability to perform Scenario Impact Analysis. Your EVMS
should deliver a model to answer, to what degree will
performance (as measured by cost and schedule) be
impacted if we experience changes in project scope,
design, etc.
EcoSys provides a
number of specific
capabilities that aid in
the execution of EVM at
any level of rigor.
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Right-Sized EVM
Beyond implementing the bare bones described above,
• Create a full project performance picture. This means
working toward optimized EVM involves a fair amount
monitoring non-EV key performance indicators (KPIs) in
of tinkering and fine tuning. Outside the constraints of
conjunction with EV metrics.
compliance, EVM offers a wide range of configurations
• Develop EV metrics on a cross-section of data as
that depend heavily on the needs of your projects and the
appropriate – not just costs, but also hours or quantities.
needs of your organization. Given such a range of options,
Then be able to roll up EV accordingly.
how do you apply the “right amount” of EVM? What is the
minimum EVM before we’ve stripped out too much detail?
The following elements should be achieved:
• Build a solid platform for budgeting, forecasting, and
change management.
• Document variance analysis and justification. Reporting
on trends and variances alone is insufficient. Having a
central record of why variances are occurring provides a
stronger tool for current and future performance
improvements.
• Use templates for WBS and progress measurement rules.
• Standardize reports and views for periodic and cumulative
trends.
• Match EV terminology to the culture of an organization to
make it accessible, user-friendly, and better understood.
PI can instead be named “Earned/Burned” or “Productivity.”
Avoid the burden of using the EIA standards when an
organization has already developed its own processes
and expertise.
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Achieving EVM Success with Software
Much of the effort associated with Earned Value
Management can be mitigated through the implementation
of software. An organization considering the adoption
of various EVM principles should consider the following
capabilities when evaluating Enterprise Projects
Performance software:
• Accessibility. How do users interact with the software?
What kind of requirements do they need? Can they make
updates from the field? Are there limitations that may
cause delays in collecting accurate cost and schedule
information?
• Scalability. Are you confident that the solution will be as
effective across the enterprise as it is for any initial “pilot”
• Ease of use. What elements of the software are familiar to
the end user and encourage adoption?
• Built-in API’s for scheduling and accounting application
integration.
• Fully tailorable terminology, EV/Credit rules, and progress
cycle. Will the software allow approaches beyond strict
EIA-748 compliance and techniques?
• The ability to provide cumulative and time phased/
periodic EV
• Comprehensive reports, graphs, and performance
dashboards
• Robust versioning/snapshot mechanisms
implementation?
• Rapid deployment and implementation of cost control
processes for any level of EV maturity.
An effective EVM implementation can provide ideal
insights into productivity and cost and schedule forecasts.
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Flexible EVM with EcoSys™
EcoSys™ Enterprise Project Performance software provides
a centralized hub all project and opportunity related
data. EcoSys provides a solid foundation for Earned Value
Management through comprehensive integration of portfolio,
• Users have real-time access to Earned Value analytics,
including four best-practice Independent Estimate at
Complete (IEAC) calculations
project, and contract data, best-practices project controls
• Scalable system architecture allows large and complex
and planning tools, and role-based reporting and analytics.
projects to operate side by side with smaller and more
While many organizations have leveraged EcoSys to
predictable projects, with unique levels of detail assigned
facilitate full EIA-748 compliance for large government
to each. Level of detail can also be applied differently
contracts, those same organizations – and many more – take
within larger projects to direct scrutiny where it’s needed.
advantage of the platform’s flexibility to adopt right-sized
EVM for their other projects. In addition to the efficiency and
communications benefits, the tool provides a number of
specific capabilities that can aid in the execution of Earned
Value at any level of rigor :
• Users can establish various thresholds for different
projects, or a different scope within the same project
– monetary thresholds, percent thresholds, or a
combination of the two.
• Best practice progress measurement techniques can be
applied to unique elements of the project – for example
through the work breakdown structure – to properly
determine percent complete.
• Progress measurement can be imported from several
different formats, or it can be entered directly in EcoSys.
Progress Measurement can also be routed through a
workflow for approval.
• Analytical dashboards can be configured specifically for
Earned Value Management, with drill-down capabilities
for quick root-cause analysis.
• The collaborative capabilities of the tool allow for timely
and meaningful input from various key stakeholders,
on topics like risk mitigation, RFIs, cost and schedule
analysis, and change management, all viewable in
one location.
• The system routinely and reliably integrates with
scheduling systems and ERP systems to pull project and
WBS-level dates and actual costs. Dates and time-phased
curves can also be managed directly in EcoSys.
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Examples of Flexible EVM
The following examples illustrate successful best-fit approaches to EVM adoption.
Nuclear Power Contractor
A nuclear power contractor with several projects in R&D,
• Allowing the EV techniques to vary by work packages,
construction, and services across North America has
utilizing the concept of the right EV tracking for the right
successfully implemented EVM within their organization.
work package;
Standardized on industry leading ERP and scheduling
systems, the company desired a centralized source of
• Keeping the full time-phased history of EV for a month so
they were able to see how EV improved over time.
project data that would provide accurate forecasts for a high
profile project while providing visibility into performance for
They looked at performance based on month, year, and
their customers. To accomplish this, they added a project
project life to highlight long-term and local trends starting
controls platform that integrated with their other systems
to develop. The have also integrated changed management
and served as the EV reporting engine.
into their current budget and forecasts.
They were tracking percent complete in the scheduling
The organization was able to take EV reports and reference
system, which served as the source for progress
them not only on baseline budget but also current budget
measurement. Resource loading was also supplied from
and current forecast, thus allowing them to change the
the scheduling system and actual costs and commitments
budgets or forecasts in real time. This gave them the
were sent to the Enterprise Projects Performance system
ability to analyze performance not just by work breakdown
from the ERP. Approved change order and time sheet data
structure but by discipline, by alternate breakdown
from contractors were then integrated within the Enterprise
structure of different sorts.
Projects Performance hub, which became their EVM
environment. Highlights of the project include:
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Federal Transportation Agency
Another example of how EVM was implemented within an
coming out of their enterprise financial system. It was also
organization was the system that was a part of the U.S.
vital for the agency to check what its vendors were reporting
federal transportation program. The multi-billion dollar
so they could submit their Cost Performance reports
program was scheduled to modernize core transportation
based on standard percent completion templates from
infrastructure in multiple locations across the country.
their contractors. With real time data being added into the
The goals for this program were: standardizing progress
system, they were able reconcile what their vendors were
measurement, milestone percent completion, and the ability
submitting for payment with and what they were reporting in
to use standard project templates in their
terms of performance and progress.
scheduling system.
For this project, it was important to consolidate funding
information, budget commitments and obligations that were
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Engineering & Construction Firm
A direct-hire contractor with a 40-year resumé
For small projects, they create a document that outlines
and construction expertise in power, oil & gas, and
how work and performance will be measured. In this simpler
petrochemical industries has adopted EVM tailored to the
approach, the organization would track CPI and SPI as its
requirements and complexity of any given project. For large
key performance indicators. When performing according
cost-plus or time-and-materials contracts, they utilize
to plan, these metrics equal 1. With designated thresholds
an EVM approach that fully complies with the 32 EIA-748
(e.g. below 0.9, signaling lower than planned productivity),
guidelines. For medium projects and Firm Fixed Price (FFP)
this triggers a red flag that needs to be investigated right
projects, they use a risk-based and scalable EVM system
away. These measures would also be used in revising the
that complies with the seven principles of EVMS contained
periodically updated forecast.
in EIA-748, and adopt selected EIA-748 guidelines.
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Measure Progress.
Predict Outcomes.
Improve Performance.
How Much Earned Value Management Do You Need?
EVM is not a one-size-fits-all concept. Every organization
and processes to achieve these principals to only what
must determine what the “right amount” of EVM is, to
is essential. With this approach, project management
fit its unique project portfolio and internal processes.
professionals can elicit buy-in from executives and decision-
Fundamentally, this means delivering on the central
makers that EV can be easily and effectively measured within
principals of EVM – measuring, forecasting, and improving
their organization and that it is a necessary aspect of their
project performance – while minimizing the overhead
overall project management plan.
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