Earned Value Management (EVM)

EVM refers to a very specific set of techniques applied to measuring project progress. Like the development of the Critical Path Method itself, Earned Value Management was developed by the United States Department of Defense to control costs overruns on multi-million dollar research and development projects (DoD Instruction 7000.2, 1967).

a Critique

The goal of the CPMtutor is to provide enough scheduling theory as to make the practice of developing and using the Critical Path Method useful for managing constructino projects. As heritical as it may sound to some, particuarly those who get paid to teach Earned Value Management at expensive seminars, EVM practice is typically a theoretical exercise for most construction managers.

The primary critique of Earned Value Management as applied to construction is that the only situation that warrants the use of these formal mangement techniques is in the area of so-called "cost-plus" contracting. Cost-plus constracts are the only type of contruction contracts where contractors are required to divulge their budgeted costs. Such contracts represent the smallest fraction of all but the largest construction projects.

From a theoretical point of view there is also an assumption that delays are spread proportionally between critical path and non-critical path activities. If this assumption is not correct, then the EVM caculations may actually support incorrect management actions. Those interested in following this up should investigate the Civil Enginering and Operations Research acacemic literature.

Finally, construction schedules are models that must be useful for those in the field to highlight aspects of the project where attention must be paid. Use of absract valus and acronyms such as BCWP and SPI actually result in barriers to communicating the information contained in construction schedules. Its great to have a tool for accountants working on DoD R&D projects to haggle about much to get paid, but that's outside the scope of the CPMtutor...

a Synopysis

Since Earned Value Management is taught as part of construction management programs and may be encountered on some contracts by some owners the CPMtutor provides the following brief synopysis of EVM. If you are unfortunate to have this forced upon you in a contruction contract setting, that is not a hundred-million cost-plus contract the CPMtutor recommends that you higher a good consultant.

EVM Terminology

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EVM Graphic

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EVM Cacluations

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So now you know...

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