Earned Value Analysis Project Management

Earned Value analysis is a method of performance measurement. Earned Value is a program management technique that uses “work in progress” to indicate what will happen to work in the future. Earned Value is an enhancement over traditional accounting progress measures. Traditional methods focus on planned accomplishment (expenditure) and actual costs. Earned Value goes one step further and examines actual accomplishment. This gives managers greater insight into potential risk areas. With clearer picture, managers can create risk mitigation plans based on actual cost, schedule and technical progress of the work. It is an “early warning” project management tool that enables managers to identify and control problems before they become insurmountable

It enables managers to close the loop in the plan-do-check-act management cycle (PMI, 2005). Earned Value Management has become the most commonly used method of project performance measurement (Chen and Zhang 2012). Practitioners also refer to Earned Value Management concept as Earned Value Project Management, Earned Value System or Earned Value Analysis, but there is no much difference between these terminologies. Earned Value Management offers the project manager a tool to timely evaluate the general health of a project along the life of the project. Particularly Earned Value Management has been used to estimate cost and time to complete, identify cost and schedule impacts of known problems, accurately portray the cost status of a project, trace problems to their sources, portray the schedule status of a project, provide timely information on projects and identify problem areas not previously recognized (Kim and Duffey 2003). The description and derivation of Earned Value Management elements have been comprehensively described in many sources. (PMI, 2005) classifies the terminology into two categories: key parameters of Earned Value Management including Planned Value, Earned Value and Actual Cost and Earned Value Management measures (variances, indices and forecasts). Additionally the evolution of Earned Value Management concepts raised

Determining Earned Value is a managerial accounting technique. Measuring Earned Value as work progresses is an essential project management technique”. No major differences in stating the Earned Value concept according to the available references in that regard as (Ernst, 2006) also touched on the basic concept of the Earned Value Management as “A management tool that integrates the technical, cost and schedule parameters of a project. During the planning phase, an integrated baseline is developed by time phased budget resources for defined work. As work is performed and measured against the baseline the corresponding budget value is “earned”, consequently Earned Value metric cost and schedule variances can be determined and analyzed, from these basic variance measurements the project manager can identify significant drivers forecast, future cost and schedule performance and construct corrective action plans to get the project back on track. Earned Value Management therefore encompasses both performance measurement (i.e. what is the program status) and performance management (i.e. what we can do about it). Earned Value