Earned Value Management Basics for the PMP Certification Exam
The PMP Certification Exam scratches the surface of EVM, but nonetheless, you should expect five or so questions on this topic. After you understand the underlying concept, it is quite simple.
EVM integrates scope, schedule, and cost in the planning, monitoring, and controlling disciplines. Although implementation of a full-scale EV system is quite complex, the following nine steps summarize what you need to know to understand the concept for the PMP.
Plan the work by using a work breakdown structure (WBS).
Identify resources and persons accountable for the work.
Schedule the work.
Estimate the costs.
Develop a performance measurement baseline.
Monitor the work against the baseline to determine variances.
Control the work to keep the project on schedule and on budget.
Manage changes to maintain the baseline integrity.
Develop forecasts for future performance.
Note that all these steps are consistent with good project management. In fact, there is a saying, You can do good project management without using earned value, but you can’t do earned value without using good project management.
Many terms are associated with EV as well as many abbreviations and acronyms. And so you can really understand how this works and can be applied, here is an example that will help the pieces fall into place.
Earned Value Management (EVM). A methodology that combines scope, schedule, and resource measurements to assess project performance and progress.
Planned value (PV). The authorized budget assigned to the scheduled work.
Earned value (EV). The measure of work performed expressed in terms of the budget authorized for that work.
Actual cost (AC). The realized costs incurred for the work performed on an activity during a specific time period.
Budget at Completion (BAC). The sum of all the budgets established for the work to be performed.
If you work for the federal (U.S.) government, or for a subcontractor for the government, you might be required to use EV on your projects. However, you might have heard different terms used. When the earned value technique was first used in the 1960s, the terms were budgeted cost of work scheduled, budgeted cost of work performed, and actual cost of work performed.
Since then, the terms planned value, earned value, and actual cost have been substituted for those terms. However, there are still pockets in government agencies, the Department of Defense (DoD), and their subcontractors that use the old terms. The following table shows the correlation.
|Old Term||Current Term|
|Budgeted cost of work scheduled (BCWS)||Planned value (PV)|
|Budgeted cost of work performed (BCWP)||Earned value (EV)|
|Actual cost of work performed (ACWP)||Actual cost (AC)|