Have you sat in a meeting recently where you heard someone say something such as, “We did terrible this month, we planned a lot of BCWS but claimed very little BCWP and our ACWP was far greater than our BCWP!” or even worse, “I claimed no P this month!” Who talks about claiming P? What kind of foreign nonsense is this? Why must we use it?
As if learning all (quite impossible if you ask me) the DoD acronyms is not complicated enough, they had to throw in another one: EVM. Earned Value Management (EVM) is a management tool (yes, another tool or process!), that gives Program Managers insight into cost, schedule, and performance on their respective program(s) or contract(s). I stress that it is a management tool, and should not be seen as just a contractual requirement. The DoD embraces EVM as an industry best practice and requires the use of the tool depending on a variety of factors such as contract type, contract value, risk, etc. That being said, those who still view EVM as a foreign entity will gain insight into the benefits of using the tool rather than staying as far away from it as contractually possible. Now, let’s discuss what EVM as a “best practice” can do for a program manager and why it should be viewed as something helpful instead of a daily dose of required busy work. As stated previously, EVM manages the work scope, schedule, and cost and tracks the progress towards these goals. Implementing EVM effectively (that’s the key!), allows a program manager to measure performance, manage cost, schedule risk, and forecast final cost – which can be the Program Manager’s biggest nightmare or dream come true! Essentially though, EVM provides an early warning for any deviation from the scheduled baseline (planned work) and allows for implementation of necessary corrective actions. Let’s look at a simple example from the company T-shirts “R” Us. They make…T-shirts! For convenience sake, let’s assume that they planned their efforts equally across all three months. This leaves them with a schedule to create 100 t-shirts a month for $10 a shirt ($3000/300). After one month, here is how they are tracking… One month in and they have created 150 t-shirts! Great news! We are ahead of our schedule (BCWS). What do you notice about the cost though? Last time I practiced simple math, $2250/150 unfortunately did not equal $10 a t-shirt! Though we have produced more t-shirts than planned, the cost of the shirts equals $15 a t-shirt, and thus they are overrunning their plan. Bad news! What does this mean? Are the costs of the remaining shirts going to be cheaper so that we come in at a total project cost of $3000? More insight into the project, learning details of the circumstances, and of course a variety of METRICS (everyone loves metrics!) would help give the program manager a forecast of possible outcomes for his project. If we just look at one month of data, one could predict that T-shirts “R” Us will complete ahead of schedule, but cost more than planned. This is an easy example of course, and there is a lot more that can be discovered with EVM, but for simplicity sake we will keep it at that. EVM does not just apply to your particular contract or project, but it allows the decision makers to make informed decisions and in some cases estimate future work. As always, it is important to be accurate, honest, and upfront. Embrace it with open arms and know that it is meant to HELP! For more acronyms to boggle your mind, check out the Glossary of EVM Terms.