Why should I use Earned Value Analysis?

Posted by Kevin Brady on Fri 22nd August 2008 at 01:02 PM, Filed in Programme ManagementProject ManagementEarned Value

If you are not sure what Earned Value Analysis is all about then please look at my earlier post “What is Earned Value Analysis”.
Currently EVA has most traction in the US. This is due to the fact that the main project management institute defining best practice in the states (the PMI) have EVA as a major part of their project management syllabus. It was therefore no surprise to me that my first encounter with EVA was with Accenture and that most excellent subsidiary of theirs Avanade. Avanade use EVA as a key project monitoring and control strategy for the timely delivery-to-budget of fixed price projects.

It is worthwhile noting that EVA is only of value in an imperfect world. If projects ran more often than not to time and cost, then we would not need project performance measurement techniques such as Earned Value Analysis. As I have pointed out in previous posts, “IT project failure” is a huge issue with projects and programmes of work all to frequently closing prior to release, running over budget, over time or released with only part of the requirements achieved. Until we get failure rates to fall below 70% (estimate given by the CHAOS survey), industry needs more not less performance monitoring and control over IT projects.

In my view, having seen the power of EVA to predict early on in a project lifecycle the final outcome of a project with astonishing accuracy, it is a crystal ball which is difficult to resist when running my own projects. EVA is a “must” because:-

  • “Bad news does not age well” so the earlier you have critical facts on the performance of your project available the better chance you have of managing your stakeholder’s expectations.
  • Early outcome predictions allow time to recover at the lowest possible turn round cost.

For these reasons and many more is why EVA is a major part of PMI project management best practice and has recently become a “must do” federal requirement in the US.  The US Office of Management and Budget (OMB) (Circular A-11, Part 7) has made it a legal requirement of all federal agencies to use EVA for the management of all its agency capital investments. The following is a key extract from this circular:-

“Agencies must use a performance-based acquisition management system based on the *ANSI/EIA Standard 748, to measure achievement of the cost, schedule, and performance goals.”

*For reference ANSI /EIA Standard 748 is all about EVA.

So the big question is why is the UK government not making this a legal requirement and UK management consultancies and large corporations not making this a key part of their Project Management Delivery Processes. It is interesting that the most profitable management consultancies in the world are US based and big EVA users. Perhaps this is some of the “secret sauce” behind their success. The UK needs to listen, watch and learn from the “big boys” across the sea. Let’s hope the UK catches up with the wave soon. smile

 

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