Cost control entails keeping track of costs, work accomplishments, and time. If the entire cost of a project at a given period exceeds the cost baseline, cost-cutting actions may be required. Such project management measures may include everything from ensuring that only tasks within the scope of the job are completed to informing stakeholders of anticipated cost overruns. It is necessary, professional, and ethical for a project manager to detect and report on these difficulties as soon as they are recognized. There are effective solutions available in this situation.
Earned value management (EVM)
Earned value management (EVM) is a cost-tracking approach that examines project expenses in relation to finished work. Its strength is that it considers cost, time, and job completion within the scope of the project all at the same time. It makes use of a work breakdown structure and a budget generated during the development stage, but it tracks these metrics during the implementation stage of a project’s life cycle.
Earned Value Management (EVM) is a robust and effective technique for administering and managing the performance of a project. This technique incorporates the management of the scope or set of activities to be completed, as well as the related cost and time, which are the three fundamental aspects of every project [1]. In order to identify the project’s performance, these three factors must be monitored and followed up on on a regular basis. In this approach, the EVM gives a “early” indicator of its state, allowing the project manager to decide on an execution strategy while adhering to the budget and agreed-upon planning [2].
The planned value (PV) is the cost of the work that is anticipated to be completed. This is the portion of the project budget that is expected to be spent at any particular moment. This is also known as the budgeted cost of scheduled work (BCWS).
Actual Costs (AC) are simply the funds spent for the task completed. This is also known as the real cost of work accomplished (ACWP).
Earned Value (EV) is the percentage of the entire budget that has been accomplished at a certain point in time. This is also known as the budgeted cost of work done (BCWP). EV is computed by multiplying the budget for activity by its percent progress.
Calculations of Earned Value
With the words PV, EV, and AC defined and how to calculate progress, certain crucial calculations can be readily performed, providing important information on how the project is progressing. The formulae for calculating earned value are as follows:
• Cost Variability (CV) = EV – AC
• Variance in Schedule: SV = EV – PV
• CPI = EV / AC = Cost Performance Index
• SPI = EV / PV = Schedule Performance Index
References
[1] Anbari, F.T. Earned value project management method and extensions. Proj. Manag. J. 2003, 34, 12–23.
[2] LĂłpez Pascual, J.; MelĂ©ndez RodrĂguez, J.C.; Cruz Rambaud, S. The Enhanced-Earned
Value Management (E-EVM) Model: A Proposal for the Aerospace Industry. Symmetry 2021, 13, 232.
