Earned Value is a method measuring project performance. It is sometimes recognized as something which is done for compliance with a contract and has a reputation for being quite complicated.
EVM is actually really simple.
EVM takes some of the fundamentals of any good project management system. That is understanding what your scope is, looking at your budget over the time of that project, taking actuals – your actual cost, your actual hours spent, and then measuring your progress to date. That’s it. That’s all Earned Value is.
Earned Value has been shown through studies to be a tremendously strong indicator of future performance. For example, there was a very detailed study that determined when you’re 20% of the way into a project, your performance up to that time is indicative of where you’re going to end up on that project once the project is completed plus or minus 10%.
When you compare that to the norms of performance in the project management industry, that’s extraordinary. We’re seeing consistent reports of where projects double their budgets, which is 80% over schedule. That is the norm.
To have that predictive power is extraordinary and that’s what Earned Value delivers.
Traditionally, where you saw Earned Value was on very large Aerospace and Defense types of contracts where governments are mandating following an Earned Value method.
Now what’s exciting is that people are seizing upon Earned Value as a great forecasting tool or predictive tool. So, they’re starting to apply Earned Value principles to any type of project.
The trick is being able to capture progress in a simple and easy to use way.
With EcoSys, we looked at Earned Value and we wanted to ensure that we could perform Earned Value in the most rigorous way demanded by some of the largest projects in the world. Where you could track Earned Value according to an EIA748 standard across a billion-dollar project.
But what’s exciting is that we also established Earned Value methods that are quite simple for other types of projects that don’t require quite so much rigor.
We allow you to roll up the Earned Value performance across an entire portfolio of projects and we can understand how our entire portfolio is performing.
Often what we see with failed Earned value implementations, is that they over complicated it.
Our focus when rolling out Earned Value is to capture progress as high as we can, to still provide meaningful information, but in the simplest, most efficient way. So, we’re doing that now with mobile apps out in the field integrating with many of the Hexagon and Intergraph products that are pulling together work package information, pulling in actual progress from the 2D or 3D model.
These are some of the ways we are now capturing progress, deliverables. The other way that Earned Value can fail is if its just a reporting exercise. See for us, what we see with Earned Value is that it’s really the Linchpin of your project control system. It allows you to understand what your performance trends are and forecasts going forward based upon that.
Where we see people really start to embrace Earned Value is when they can start to use it, when all of the people in the field understand what their forecast is going to be based upon their past performance.
With project management, very often you’re looking at what did we actually spend months ago, what was our budget two years ago when we approved this project, what was the funding that was provided. These are all lagging indicators.
But Earned Value is the executive secret weapon. What it’s doing is it’s capturing past performance, and then it’s using those metrics to forecast where are we going to end up on this project. We can do that for each project and we can do it for the entire portfolio.
For an executive who wants to have a true pulse on what’s happening across all of their projects, and to be able to confidentially predict what’s going to happen in the future, that’s why they need Earned Value.