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EVM Myth #1: Only Government Agencies and Contractors Need to Implement Earned Value Management
January 21, 2009 | Author: PM Hut | Filed under: Cost Management
EVM Myth #1: Only Government Agencies and Contractors Need to Implement Earned Value Management (#1 in the series The Seven Deadly Myths of Earned Value Methods in Project Management)
By Keith Custer
After decades of using and teaching Earned Value Management techniques, we have seen a lot of misinformation about Earned Value – and the advent of the Internet has only made the problem worse. Sometimes these misconceptions reflect simple ignorance of what Earned Value “really is,” fear of the difficulty of implementing Earned Value methods, associations with stodgy government and defense contractors, or, increasingly often, misleading and/or meaningless new marketing terms. The fact is, the Earned Value Management techniques laid out almost 40 years ago continue to be one of the best ways to manage almost any project, and should be a key part of any Project Manager’s toolkit. With that in mind, we set out to “bust” seven of the most common myths about Earned Value Management.
It is true that Earned Value was originally developed by the US government, and that governments have led the way in implementing EVM. The reason they have pushed so hard for its use – and this has been confirmed by many government studies – is because EVM is the most effective set of tools for monitoring and forecasting project performance.
With a $3 trillion budget, the US federal government is by far the largest project-managing entity in the world, and for many years the most incapable of managing these projects. Many individual US government projects are larger than all but the largest private corporations. This is true in other countries as well, where the government is typically in charge of the largest and most complex defense, research, energy, and public works projects (whether through contracts or by managing them directly). Recent studies in “Mega Projects and Risks” by Bent Flyvbjerg found that almost ALL very large projects around the world initially significantly underestimate their project costs and, just as notoriously, they often vastly overrun their project budgets in the final analysis.
Governments also face unique pressures on their very large projects from politicians and the taxpayers who elect them to keep track of where all this money is going. Because of this, governments spend significantly more time and energy studying which project management techniques work (and which don’t) than private companies.
In the United States we have two powerful, independent agencies that frequently monitor the spending and performance of government agencies and contractors – the Office of Management and Budget (part of the White House) and the Government Accountability Office (part of Congress). Both have performed many studies showing that EVM is the most effective method for addressing the problems of under-estimating and managing to intended result. Similar studies by similar agencies in other countries have confirmed this result.
EVM’s Work Breakdown Structures, schedule constructs, and Organizational Breakdown Structures provide a significant boost to the accuracy of scoping and estimating project budgets. EVM’s variance reporting, monitoring of project performance, and ability to forecast project outcomes provides the best estimates at almost any point in a project of what it will ultimately cost to complete. So government has learned that EVM provides significant insight to help hold Project Managers accountable. This accountability, and a long positive track record on numerous large projects, has led many governments to absolutely mandate EVM use on all their projects both internal and external. Private sector companies are now learning (if they had not already) the same lessons about EVM and are mandating EVM as well. Often commercial enterprises learn from their government projects the value of EVM and implement it throughout all of their programs to ensure commercial success.
Myth 1: Only government agencies and contractors need to implement Earned Value Management – Is busted!
Keith Custer, PE, is an electrical engineer with over 30 years of consulting and management experience and is an expert in project management and the use of integrated cost and schedule techniques. He first learned about Earned Value in the 1970s, when it was still new, and has advocated its use ever since. He teaches a monthly 3-hour online training class in Earned Value Management as well an in-depth eight-module EVM tutorial (offered weekly on a rolling basis) and several other classes at www.CusterConsultants.net
Related Articles
- Introduction to Earned Value Management - Milestones: The Key to EVM
- Key Factors for Successful Construction Project Management - Perceptions of Owners and Contractors
- Introduction to Earned Value Management - EVM Statistics
- Introduction to Earned Value Management - The Need for EVM
- Introduction to Earned Value Management - EVM Project Planning
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2 people have left comments
I fully and totally agree with Keith. For 45 years I have been in construction management, mostly as a contractor. EVM (then called C/SCSC) was just being implemented as I graduated from University.
Having “grown up” with EVM, I will state that project management CANNOT be successful without using Earned Value. I believe one of the reasons projects fail with such alarming regularity derives in part from a failure to use EVM properly and appropriately.
“Properly and appropriately” means that an organization not only links payment to performance, but has an activity based cost accounting system in place to enable actual costs to be captured at a level where problems can be isolated and decisions made to fix those problems.
BR,
Dr. PDG, Jakarta
http://www.getpmcertified.com
Dr. Paul D. Giammalvo, CDT, CCE, MScPM,
Senior Technical Advisor, PT Mitratata Citragraha, Jakarta/Singapore/Anchorage/Amsterdam/Johannesburg http://www.getpmcertified.com
Adjunct Professor, Project/Program Management, Lille Graduate School of Management, Paris, FRANCE http://www.esc-lille.com
Curriculum Development Consultant/Adjunct Professor, Asset and Project Management, University of Western Australia, Perth, http://www.blendedlearning.ecm.uwa.edu.au
Board of Directors, Global Alliance for Project Performance Standards (GAPPS) Sydney, AUSTRALIA http://www.globalpmstandards.org
I finally got a chance to visit this site and found several blogs I would like to comment on and this is a great place to start.
First, government agencies are the slowest in use or adoption of EVM on their own work, so I would take exception to you statement from that point of view.
Next, I have worked as a consultant and computer system vendor in support of commercial companies that use EVM. I have to admit that it is not widely used and most of the time is in IT or construction.
In my experience, it requires a EVM zealot to evangelize EVM. Most commercial companies seem to think that it adds little to what they are already doing and of course, everyone resists change.
Any project that is longer than 6 months can utilize EVM but the greatest benefit comes from large projects that span several years. I will follow that statement with one that says, it is very ineffecient to have two different project management systems. As a believer in EVM, I think it should be the way we handle all projects.
Mark