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Earned Value Question

Discussion started by Paul Naybour 3 years ago
Earned value is a project reporting tool which provides a comprehensive view of project status, however it is not widely used. Describe five advantages / disadvantages of using earned value management in your project.

Exam Tip each of the five advantages / disadvantages should the a short paragraph of two or three sentences. For example the first of the five might say something like.

1) Earned value provides a way of tracking the plan, expenditure and progress in one integrated framework. Earned Value Management used a common currency (most often money) to measure the planned progress (and expenditure), the Actual Cost from the finance system and actual progress from estimates of percentage complete to give a combined view of these three critical performance measures. As such it provided on of the most comprehensive ways of monitoring project performance.
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Paul Naybour
Paul Naybour
Mike

Not bad but here are a few improvements to your answer.

1. One advantage of EVM is it allows the performance to be assesses against the baseline. This is done by converting the plan, progress and cost into a common currency. EVM gives an overall view of the project performance based on the value of useful work done at that point in time, relative to the baseline cost/programme. For example if the package is 10% complete, compared to a planed completion of 40% and spent 50% of the budget this is bad news – as we are likely to overspend.

2.One disadvantage of EVM is that the assessment of the useful work done is usually based on the percentage complete of an activity. This exercise is subjective and can lead to potential errors in the EVM analysis. For example the old adage in IT that the source code is 90% complete for 90% of the time.

3.One dis-advantage of EVM is the additional set-up work. To allow earned value analysis to be undertaken the baseline schedule needs to be constructed in an appropriate way to judgement of cost and budget against. This can often involve additional work to develop the project schedule to a point at which the information/detail is appropriate to be used by the process.

4.On major advantage of EVM is the ability to produce accurate forecasts. The Earned Value analysis generation of Schedule and Cost Performance Indices (SPI/CPI). These indices can be used to extrapolate the Estimate At Completion (EAC) and Planned Completion based on current project performance. Often these can give a good inform the assessments made by the project manager.

5.EVM can be useful when planning resources. The use of EVM outputs can allow the Project or Programme manager to identify projects or programmes that are underperforming or over-performing. As a result they can manage or re-allocate resources to help bring the project back on track. For example reassign resource on a project that is well ahead of programme to help manage project that is late and under spent.
3 years ago
Mike Ellis
Mike Ellis
Earned Value Management (EVM) is a common tool used to track the project performance against the baseline. A few of the advantages and disadvantages of the process are given below.

1.Assess Performance. EVM gives a view of the project performance based on the value of useful work done at that point in time, relative to the baseline cost/programme. For example if the package is 10% complete and spent 50% of the budget this is bad news – as we are likely to overspend.

2.The assessment of the useful work done is usually based on the percentage complete of an activity. This exercise is subjective and can lead to potential errors in the EVM analysis. For example the old adage in IT that the source code is 90% complete for 90% of the time.

3.Set-up work. To allow Earned Value analysis to be undertaken the baseline schedule needs to be constructed in an appropriate way to judgement of cost and budget against. This can often involve additional work to develop the project schedule to a point at which the information/detail is appropriate to be used by the process.

4.Forecasting. The Earned Value analysis generation of Schedule and Cost Performance Indices (SPI/CPI). These indices can be used to extrapolate the Estimate At Completion (EAC) and Planned Completion based on current project performance.

5.Resourcing. The use of EVM outputs can allow the Project or Programme manager to identify projects or programmes that are underperforming or over-performing. As a result they can manage or re-allocate resources to help bring the project back on track. For example reassign resource on a project that is well ahead of programme to help manage project that is late and under spent.
3 years ago
Paul Naybour
Paul Naybour
Peter
This is a very comprehensive answer, a little bit beyond the level of understanding required for the APMP. An acceptable answer would be

1) Earned value provides a way of tracking the plan, expenditure and progress in one integrated framework. Earned Value Management used a common currency (most often money) to measure the planned progress (and expenditure), the Actual Cost from the finance system and actual progress from estimates of percentage complete to give a combined view of these three critical performance measures. As such it provided on of the most comprehensive ways of monitoring project performance.

2) Earned value management can be used to measure the schedule performance of the project against the baseline plan. This is done by calculating the percentage complete by the budget for each work packages. This can then be compared to the plan to determine if the project is ahead to behind the plan.

3) As part of earned value management we can measure the actual expenditure against the progress (earned value). In this way it is possible to determine if the project is overspending compared to the amount of work being delivered. This give a good measure of project efficiency.

4) Earned value can be used to calculate performance metric for high level reporting. The performance metric (SPI and CPI) are useful for senior management to get an overview of the projects performance. Furthermore it can be used to forecast the likely project estimate at completion (EAC) and a completion date.

5) One of the main weaknesses of earned value reporting the accurate measurement of percentage complete. These are difficult because often it is hard to physical measure projects and the assessments can be subjective. Without this accurate information it then the earned value metrics and predictions can be valueless.

This is a bit simpler but nevertheless your answer is as good.
3 years ago
Peter Morse
Peter Morse
Earned value is the term used to describe an objective value to products produced by the project. It is a figure calculated by multiplying the budget allocated to the product and the percentage of the product complete. This objective measure of project (and product) performance is very helpful as it helps the project team identify if anything is going wrong and what might be done in relation to time and cost to rectify it. For example, funds can be re-distributed from other products to accelerate the production process.

Earned value calculations can look at time to deliver and highlight issues in relation to resource management. For example, if the team are working hard, but the products are no where near being produced, questions around team structure, leadership and morale can be asked.

Earned value calculations provide simple metrics and visuals that allow stakeholders to report on project performance. This supports a culture of early warning and enables a project manager to take corrective action earlier than they might otherwise have been able to do so without the quality of earned value data.

However, one can easily assume that actual cost less than planned cost is a good thing. In effect, in this scenario, the product is under budget, but if for example the estimates were overly high, this may mean the project has lost the opportunity to produce other products that might have been of significant benefit.

Earned value analysis requires a high level of definition in the work break down structure (WBS) and this is not always possible. If percentage completion rates are arbitrary the metrics will in fact be interpretative, rather than based on fact. Making decisions on project performance based on assumptions of work complete has obvious risks and can waste time and effort.
3 years ago

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