The U.S. Department of Energy (DOE) uses Earned Value Management (EVM) as a performance management toolthat measures actual performance of work scope and the associated cost and schedule compared to the approvedbaseline plan for a project or contract.
EVM has proven to be a valuable tool for project/contract managers and is used in a wide variety of government contracts and in much of the private sector as well. For most construction and cleanup projects, DOE requires the use of the widely recognized national standard for EVM from the Electronic Industry Association called EIA 748: Earned Value Management Systems.
Basic concepts of EVM:
The figure below illustrates the analysis of schedule and cost performance using the EVM technique.
- In the work scope planning stage, all activities are assigned a “dollar value” termed the BudgetedCost for Work Scheduled (BCWS). In other words, the BCWS represents the planned work in terms ofthe planned cost of that work. Physical progress is measured in dollars, so schedule performance andcost performance can be analyzed in the same terms.
- During contract execution, activities “earn” the apportioned dollar value based on the amount ofwork actually completed, termed as the Budgeted Cost for Work Performed (BCWP). In other words, theBCWP represents the work that is completed in terms of the originally planned cost for that work.
- The actual amount of money spent on the completed work is tracked as the Actual Cost of WorkPerformed (ACWP).
- The BCWPcan then be compared to the ACWPto determine any cost variance (under- or over-spending).
- The BCWPcan also be compared to the Budgeted Cost for WorkScheduled (BCWS) to determine any schedule variance (ahead or behind schedule).
- The BCWP and ACWP can also be used to anticipate future performance trends and forecast anychanges to the Completion Date or the Estimate at Completion.
The benefit of EVM is the ability to take physical progress into account when analyzing cost performance. If aproject’s or contract’s actual costs to date are simply compared to planned costs, without a measure of physical progress, theresults can be misleading since the relationship of progress and spending are not known. When properlyapplied, EVM provides an early warning of performance problems. By identifying trends andproblems early, EVM helps managers effectively plan, control, and manage work scope so they can take correctiveaction and re-plan the work, if necessary. Systematic implementation of EVM throughout the organizationallows comparative review of project and/or contract performance, helping managers make better-informed decisions.
DOE’s EVM approach:
DOE has improved its approach to project and program management by integrating EVMconcepts in managing major projects, contracts and in reporting project status.
EM uses EVM as part of an integrated management system to evaluate project and contract performance. EVM objectively measures performance against the approved performance baseline plan that describes the requirements to be met by the project or contract in terms of scope, deliverables or milestones, schedule and cost. Progress on performance goals utilizing EVM data is assessed monthly by every level within contractor and DOE management from the contractor control account manager closest to the work up to the DOE Senior Management. Effective application of EVM with performance baseline management is intended to improve EM’s success rate in completing projects and cleanup activities on time and within budget.
Capital Asset Projects subject to the requirements of DOE Order 413.3B, “Program and Project Management for the Acquisition of Capital Assets,” with total project costs (TPC) greater than $100 million must have an EVMS certified by the DOE Office of Project Management.
