Earned Value Technique for Performance Measurement

Abstract

Earned Value is a project control technique which provides a quantitative measure of work performance. It involves a crediting (earning) of budget dollars as scheduled work is performed. The earned value technique is a proven method to evaluate work progress in order to identify potential schedule slippage and areas of budget overruns. Value earned for a given task is computed as budgeted cost of work performed and is a function of time, work completed, and budget. Budgeted cost of work performed is compared against actual cost of work performed and budgeted cost of work scheduled to assess cost and schedule variances, respectively. Cost and schedule variances may be identified at the individual cost account level or at any other level up to the overall project for upper management review. Variances may be identified by work element and organizational disciplines. Variances may be reported as a percent of the baseline and presented graphically. The work breakdown structure, detailed schedules and cost account budgets form the foundation for earned value assessment. Project management control points are established by creating a matrix of the work breakdown structure and the project organizational breakdown. This identifies functional managers and subcontractors responsible for work performance. Each control point is represented by a cost account and establishes the lowest level for evaluating cost and schedule performance.