Earned Value Management (EVM)

Earned Value Management (EVM) is a project management technique for measuring project performance and progress in an objective manner. EVM has the ability to combine measurements of scope, schedule, and cost in a single integrated system. It’s notable for its ability to provide accurate forecasts of project performance problems. Early EVM research showed that the areas of planning and control are significantly impacted by its use; and similarly, using the methodology improves both scope definition as well as the analysis of overall project performance.

EVM is a key integrating process in the management and oversight of acquisition programs, including information technology projects. It is a management approach that has evolved from combining both government management requirements and industry best practices to ensure the total integration of cost, schedule, and work scope aspects of the program. Unless waived by the Milestone Decision Authority (MDA), EVM applies to contracts described below. The program manager’s approach to satisfying the EVM requirement for applicable contracts should be documented in the program Acquisition Strategy. [1]

An Earned Value Management System (EVMS) can be defined as an integrated management system and its related sub-systems that produced the 5 main EVM variables. (See EVMS Integration & ANSI/EIS 748 EVMS Standard)

EVMS Compliance (DFARS Subpart 234.2)

The requirement for EVM applies to cost or incentive contracts, subcontracts, intra-government work agreements, and other agreements that meet the dollar thresholds prescribed in DoD Instruction 5000.02. The application thresholds (total contract value including planned options in then-year dollars) are summarized below: [2]

$20 million but less than $50 million: EVM Implementation compliant with the guidelines in ANSI/EIA 748 (available for purchase) is required. No formal EVMS validation is required. (See Compliance & Validation)
$50 million or greater: EVM implementation compliant with the guidelines in ANSI/EIA 748 is required. An EVMS that has been formally validated and accepted by the cognizant contracting officer is required.

EVM is an important tool used by Program Managers (PM) and Systems Engineers in the Technical Assessment Process to appraise the program’s technical progress against the Performance Measurement Baseline (PMB). Systems Engineering is responsible for characterizing the entire technical scope of effort in the Work Breakdown Structure (WBS) and the corresponding event-driven program implementation in the Integrated Master Schedule (IMS). The WBS and IMS form the basis of the PMB and the foundation of EVM.

5 Main Earned Value Management (EVM) Variables:

Earned Value Management (EVM) Glossary

ETC: Estimate at Completion
BAC: Budget at Completion
CPI: Cost Performance Index = BCWP / ACWP Favorable is > 1.0, Unfavorable is < 1.0
SPI: Schedule Performance Index = = BCWP / BCWS Favorable is > 1.0, Unfavorable is < 1.0
EV: Earned Value

Earned Value Management (EVM) Variances

Cost Variance (CV) indicates how much over or under budget the project is. It is used to track expense line items, but can also be tracked at the project level, as long as there is a budget allocated to the item. CV is used by the Program Manager and program personnel to determine how best to utilize their remaining resources.
Schedule Variance (SV) indicates how much a project is ahead or behind schedule. It measures whether a project is on track by calculating actual progress against expected progress. SV is used by the Program Manager (PM) and program personnel to determine how best to utilize their remaining resources.

Earned Value Management Topics

Topics that Program Managers and EVMS Personnel should understand include:

AcqTips:

The DoD has accepted the ANSI/EIA-748 – American National Standards Institute/Electronic Industries Alliance Standard 748, Earned Value Management Systems as the DoD standard.

AcqLinks and References:

Updated: 8/1/2021

Rank: G14.4

Program Management