Earned Value Analysis Is A Method Of Performance Measurement And Feedback Tools For Managing Project

Earned Value Analysis Is A Method Of Performance Measurement And Feedback Tools For Managing Project

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Earned Value analysis is a method of performance measurement. Earned Value is a program management technique that uses “work in progress” to indicate what will happen to work in the future. Earned Value is an enhancement over traditional accounting progress measures. Traditional methods focus on planned accomplishment (expenditure) and actual costs. Earned Value goes one step further and examines actual accomplishment. This gives managers greater insight into potential risk areas. With clearer picture, managers can create risk mitigation plans based on actual cost, schedule and technical progress of the work. It is an “early warning” project management tool that enables managers to identify and control problems before they become insurmountable (Sagar and Gayatri, 2012).
Earned Value Management has proven itself to be one of the most effective performance measurement and feedback tools for managing project. It enables managers to close the loop in the plan-do-check-act management cycle (PMI, 2005). Earned Value Management has become the most commonly used method of project performance measurement (Chen and Zhang 2012). Practitioners also refer to Earned Value Management concept as Earned Value Project Management, Earned Value System or Earned Value Analysis, but there is no much difference between these terminologies. Earned Value Management offers the project manager a tool to timely evaluate the general health of a project along the life of the project. Particularly Earned Value Management has been used to estimate cost and time to complete, identify cost and schedule impacts of known problems, accurately portray the cost status of a project, trace problems to their sources, portray the schedule status of a project, provide tim...

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...nt using the traditional cost control approach as compared to the three dimensional data available when a project employs Earned Value and focus on variances to the baseline plans. It is very important to highlight the major differences between the Earned Value Management and the traditional cost management (Fleming and Koppelman 2000), in traditional cost management there are two data sources, the budget or planned expenditures and the actual expenditures. The comparison of budget versus actual expenditures merely indicates what was planned to be spent versus what was actually spent at any given time disregarding the physical progress (Solanki, 2009) but unfortunately comparing those two cost performance elements and measuring the performance based on this comparison – disregarding the progress of work – most probably will give a fake indication on the performance.

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