The Earned Value Criteria: A Layperson’s Interpretation

A Project Management Article by Carl Pritchard, PMP, PMI-RMP, EVP

To those of you who made it this far into this article, kudos!  For many, as soon as they saw the words “earned value” in the title, they begged off.  No one wants to have the earned value conversation, particularly those folks who are not actively doing earned value.  But they could and they should.  Why?  They should give serious consideration to the earned value criteria because they’re criteria that actually lead to effective mechanical application of project management and its tools and structures.

The 32 Cost-Schedule Control Systems Criteria (C/SCSC) align with the ANSI standard for earned value (748-B), and outline what a good earned value management system (EVMS) incorporates.  Oddly enough, it all just sounds like the fundamentals of effective project management.  To those who have never read the criteria, they’re enlightening, and can be summarized in the few paragraphs below:

Organization

You need to have an organization, and need to know who’s in charge at the various and sundry levels.  People at different levels need to know which chunks of the work breakdown structure are theirs for action and reporting.  And someone, somewhere really needs to take a few minutes, sit down with Accounting, and figure out where they’re accounting for costs in the WBS and how they’ll handle the indirect costs for work we do.  Pretty easy so far, huh?

Planning and Budgeting

Sooner or later, we have to suck it up and create the activity list (below the work packages) and network them to show what comes first and what comes next.  That same document should include milestones.  We’ll also need a list of what we’re actually producing out of this project, and if we don’t know what it’s going to take or going to cost, we’ll need to let folks know when we’ll figure that piece out.  The nice thing is, that if we have all of that built against a WBS, we can roll it up for reporting, and roll it up even further for a summary view of the project.  For the risks on the project, we’ll need some reserves, too.  Management should really get a look at that plan, and sign off on it.  

Accounting Considerations

I once did an earned value audit for a firm in Atlanta, Georgia.  It was fascinating.  When I asked about actuals, they said “We don’t do actual actuals.”  I knew we were in trouble.  Under the criteria, they’d be in trouble.  We have to be able to actually track actuals for our control accounts, resources, subcontractors and our indirect costs.  And we need to know how current the information is.  Is it a week old?  A month?  That matters.  Sooner or later, we’re going to have to identify where all the money went on the whole project, including any leftover materials or equipment

Analysis and Management Reports

Management, in their infinite wisdom, has a right to see information about how we’re spending their money, so we should be braced to report on what was scheduled to be done, what was really done, and how much we spent to get there. If we’re dipping into the reserve accounts, management will likely want to know how much of that we’ve consumed and we’ll have to use all of that information to make an honest best guess as to where the project is going to wind up. If, in the course of going through all of this data, we notice some specific trends or trouble spots, we should share that information with our superiors, since they’re going to figure it out eventually anyhow.

Revisions and Data Maintenance

Customers have a nasty habit of actually wanting what they asked for, so part of our job will invariably be to make some changes.  We should have a game plan for how we’re going to incorporate those changes from the beginning of the project, and now is the time to implement that plan.  We have to modify the WBS accordingly, tell team members what new work they’ll be doing and let management know if it’s going to completely skew our original games plans.  

We also need to let management know when the adjustments we make aren’t because of requested changes, but because of things like accounting or reporting errors.  And we don’t change the budgets and other data just because we fouled something up or because we’re trying to be nice to the customer.  We go through the change control process, because if the project manager gets hit by the bus, someone else had better be able to come in and figure out what’s gone wrong and why.  Any time we do change the performance measurement baseline, we document our brains out.

Some Conclusions

As you read through this, much of it (hopefully) came through as obvious.  That’s the compelling thing about the criteria.  They codify what should be obvious in effective project management.  They dictate the commonplace.  They memorialize what we’re suppose to be doing anyhow.  The sad fact is that most organizations do not tackle these issues.  Things like cost reporting or change management are sloughed off in the interests of expediency.  The joy of the 32 C/SCSC is that they mandate what should be the norm.  And if you actually adhere to them, compared to most PM organizations?  You’re way above normal!

About the Author

Carl Pritchard, PMP, PMI-RMP, EVP

Carl Pritchard is a recognized author, lecturer and teacher in the project management community. He is the author of six texts, co-producer of the "Portable PMP Prep" and is the U.S. Correspondent for the British project management magazine, "Project Manager Today."

He has presented keynote addresses around the globe, and sits on the board of directors for ProjectConnections.com and on the advisory board for the Project Management Leadership conference by QAI in Dehli, India.

He was the lead chapter author for the risk management chapter of the latest (4th) edition of the Guide to the PMBOK.

Carl Pritchard can be found on Facebook, Twitter, MySpace, Plaxo and LinkedIn. He can also be found with a simple e-mail to carl@carlpritchard.com

Copyright 2010, Pritchard Management Associates - Right to reproduce in full with attribution is granted freely to Washington, DC Chapter members for personal and professional use. All other rights (including resale or republication) are reserved.

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