Earned Value Management (EVM) System Essay

Pages: 11 (3318 words)  ·  Bibliography Sources: 8  ·  File: .docx  ·  Level: Doctorate  ·  Topic: Management  ·  Written: October 20, 2018

The outcome for these two instances cumulatively yields a positive outcome since the project manager has managed to save on time and budgetary money. With the save time and money the project manager can use them as a buffer to mitigate potential future issues in the project.

Figure 1: shows planned value (PV), cost in added time (AC+Time), and cost in subtracted time (AC-Time)

Creating Variance Thresholds

The EVM is used to justify the variance analysis which might explain the cause of issues, explain impact, and determine the mitigating instances. The process could be arrived at through variance analysis. Snyder (2017), argues that most control processes use variance analysis for comparison of the planned outcomes and the actual costs. The earned value and the performance value are values that evaluate the path where the project observes. Through variance analysis, it is possible to ascertain whether the project is preceding a success or failing in accordance to operation baselines and the variance thresholds (Fardad, & Masudifar, 2013).

It is possible to assess the extent of variance by analyzing the threshold measurements that will enable the project manager to identify and capture the cause of variance. The monitoring is an essential guide to seek corrective actions which are relative to the scheduled baseline and having an idea of actual issues that the variance causes. This process is essential in making determinations desirable for corrective actions during the mitigation procedures needed to fulfill the contractual project (Watenpaugh & Hyde, 2015).

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When the value of completed work is of equivalent measure to a negative figure, then it should be an indication of actual costs incorporated in the project are high than expected which needs to be mitigated and assessed for further expenditures that lead to project failure. During the Assessment of the threshold values, and the figure becomes positive, then actual costs are less than the completed work. The indirect costs are often based on project requirements whereas the direct costs include the equipment, materials, and the workforce used for the project.

Essay on Earned Value Management (EVM) System Assignment

The variance analysis is mainly founded on the management with the exclusion principle associated with determined variance thresholds that are at times given as a percentage variance or cost variance that alerts project team on the possible areas of concern (Watenpaugh & Hyde, 2015). It is possible to track project progress through first setting the project thresholds. The project team can fix the threshold variance when creating the work breakdown structure that is later used in performance monitoring.

A written variance analysis report calls for preparation to explain the reason for mitigating actions and variance needed to correct or alter the variance. Application of the principles to the theoretical project includes the overall budget that is approximately $15,000. However, the WBS in Table 1 above shows that the project cost estimate is $10,200 where there is a 25% variance in actual project cost when this has been established. There is the opportunity to employ mitigation processes for mater that arise from the variance. This is a good indicator that if it the first scenario will occur, the project team will have the chance to make corrections of issues that will prevent the project from failing or surpasses the planned cost.

The analysis reveals that the process is used in projects that are easy. Nonetheless, some programs or projects are likely to utilize the stoplight technique. For example, + or – 5% is green and therefore needs to explanation or action. The + or – 5 to 20% is yellow which needs a variance analysis report to be written whereas anything that is beyond + or – 20% is red which generates a potential stop for the project and sometimes a reevaluation with the high levels of management (Watenpaugh & Hyde, 2015).

It is also possible to come up with estimates on time management and cost principles by ascertaining the work breakdown structure is corrected for variances needful in the initiation of the project scope and project life-cycle. This technique facilitates to address issues that require mitigation to produce issues for a project manager.

Schedule Variance, Management Oversight, and Overhead

The project manager ought to integrate indirect costs in the work breakdown structure to factor for the instances of indirect budgets in the entire project. The indirect budgets are often incorporated in the EVM for schedule variance and management oversight to ensure the indirect budgets such as the cost of money, administrative and general, and overhead is determined and included in the performance measurement baseline at desirable levels for visibility (Pentagon, 2018).

The indirect budgets are incorporated in EVM for schedule performance and management oversight. The professional staff that offers administrative services should also be included in the original budget although it is regarded as the cost of doing business. The indirect and additional costs include expert services such as professional license and liability, project manager salary, legal advisors, administrative staff, and the contract auditors.

The initial budget needs to comprise the funds set aside to cover the costs affiliated with variances in addition to the administrative costs that indirectly relate to the overall project. The variance cost is regarded buffer for unknown cost especially in the first instance where stoppages of unplanned work cause overruns in time which makes up for losses within the budget (Pentagon, 2018). The variances are also used to cater for overtime and to ensure that timeline adheres and the project is finished on time.

The Interaction of Cost and Financial Management Techniques and EVM

The variation between different projects helps to establish the result of the analysis carried out for a given project. Ideally, quality, cost, time, and scope are regarded as project objectives. Cost is among the items that relate to financial issues and money. Most projects especially the ones executed for external customers makes the income factor to be critical in managing projects (Fardad & Masudifar, 2013).

The cost difference for projects will lay down the profitability of project. Besides, the EVM tool will use the baseline AC and PC of the work breakdown structure to establish whether the projects are within budget. Additionally, the EVM maintains profitability using management, cost, time, and scope of the project.

The timing of scheduled analysis is laid down although project managers need to carry out the checks for the project. The cost and financial management are not probable without the earned value management performance baseline. It is apparent that the two baseline particulars should be dependent on the EVM baseline for the financial management and costs comparison of projects (Fardad & Masudifar, 2013). The financial and cost management becomes approximations where EVM system is not utilized. Notwithstanding, without the work breakdown structure budget baseline, there are still restrictions and barriers in the accuracy of estimates.

The possibility of effecting alterations in the project is not probable in middle of a project since it is difficult to determine how the issues started and where it could impact the project that is most fundamental until the closeout and completion of the project (Fardad & Masudifar, 2013). Therefore, income management persists to be an integral component of the project resource management. The processes of both income and cost management ought to be integrated with each other. Successful management of the financial issues and cash flows of the project is reliant upon the successful management of cost and income factors versus one another.

The Reporting Points for EVM

Most project managers have the choices for the inclusionary tools just like most project managers mainly when using EVM system to make the decision required carrying out analysis about the given project (Dayal, 2008). There is no specified or preset time to carry out assessments of the reporting points just like it is at the discretion of project managers. The actual cost of a project could be tested against the planned value to establish the project track since it is typical at any time within the project about performance baseline. It is possible to make some corrections when needed and even mitigate both the long term and short term issues that takes place through running costs analysis on a weekly basis. It is also an informative way to establish possible results for the project as demonstrated in Figure 2 below.

Figure 2: show specified weekly checkpoints

The relevance of points to the Overall Performance

The performance points refer to the designated checkpoints in the project that is determined by the project team and manager when creating the work breakdown structure. The points are often used as a guideline to establish when the project management feels it desirable to make assessments of the project performance. The points are indiscriminately located at specified times where the work completion is conducted (Fardad, & Masudifar, 2013). The goals for the project as established… [END OF PREVIEW] . . . READ MORE

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