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Earned Value Project Management System — A Primer for Project Managers

Earned value management. These three words can make even some the best project managers rethink the task of managing a project.

I was recently at a space-and-defense client’s site where a discussion about the practice of earned value project management took place. The client said that he was having a hard time recruiting project managers, both internally and externally. I was surprised by this statement — especially in light of the explosion of PMP-credentialed people in recent years.

I weighed the evidence — the client worked for a good company that had strong management, and the market was good. Then I asked a senior project manager about the company’s implementation process and lessons learned. Without hesitation, the project manager said, “The first lesson we learned was not to evaluate a project by using earned value management tools. That earned value project management system stuff will get you every time.”

I finally saw the project manager’s dilemma. Only by firmly understanding the concept of earned value management could the company answer the question, “Will there be enough time and budget to do the job right?” The company’s project management process was more cumbersome because those in charge were not grasping the fundamentals. And, because of that, project managers were harder to recruit.

The three components of earned value management are:

• Planned Value: Planned value is the authorized budget assigned to the scheduled work to be accomplished for a scheduled activity or work breakdown structure component (also referred to as the budget cost of work scheduled [BCWS]). That is, the physical work is scheduled and budget is approved to accomplish the scheduled work.
• Actual Costs: Actual costs are defined as the total costs actually incurred and recorded in accomplishing work performed during a given time period for a scheduled activity or work breakdown structure component (also referred to as the actual cost of work performed [ACWP]). Simply put, the ACWP is the money spent on the project.
• Earned Value: Earned value is the value of work performed expressed in terms of the approved budget assigned to that work for a scheduled activity or work breakdown structure component (also referred to as the budget cost of work performed [BCWP]). The BCWP is the focal point when using the earned value management technique.

What’s one of the most important ways to determine earned value on your project? I firmly believe that a good project manager practices the idea of MBWA, or management by walking around. As I travel and visit clients, I’m noticing a trend of “I’m the project manager, you report to me.” This is a scary trend, as it allows project team members to report to the project manager only what they think the project manager wants to hear. MBWA may not always be a practical solution, especially on large or dispersed projects. But implementing it whenever possible could help you improve your overall performance.

About the Author:

Chance Reichel, PMP, PRINCE2^®, a lead trainer and consultant with Corporate Education Group, has over 25 years of expansive project management experience, most notably for large consulting firms specializing in project management field operations. A well-recognized subject matter expert in his field, Chance’s clients are extremely diverse, ranging from Fortune 500 companies, branches of the US Government, and space and defense technology service companies. Additionally, Chance has provided his project management expertise overseas to Korea Electric Power Corporation (KEPCO) and served in the US Navy.

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