Two Issues Concerning the Use of Earned Value Measurements

Abstract

:This article addresses two significant issues that arise in using earned value measurements (EVMs) to assess project progress: (a) the level of a product-oriented work breakdown structure (WBS) (Ruskin, 2004) at which EVMs should be made, and (b) the treatment of partly completed work. This article shows that EVMs should be made at the lowest level of the WBS for which budgets are available and should use the “0-100” approach in assessing earned value. These methods will minimize opportunities to game the system in order to “look good,” minimize overstating or understating progress, minimize overly optimistic estimates of final costs and total durations, and avoid labor-intensive monitoring and reporting efforts.By using the “0-100” approach at the lowest level of the WBS for which budgets are available, managers can meaningfully judge a project's ability to be completed within its agreed upon budget and completion date and thus decide if the project should be continued as-is, replanned (including changes in scope, budget, or completion date), or terminated. While these judgments and decisions can be made at any time during the project, empirical evidence (referenced in the article) shows that they can be reliably made as early as the first 15 to 20% of the project, thus allowing timely action before much of the project's expense is incurred.