Earned Value Management (EVM)

Base Concepts: Planned Value, Earned Value and Actual Cost

To objectively eva luate corporate performance in real time, expert strategists apply a proven mathematical methodology that cross-references tangible physical progress with direct monetary investment.

This analytical system is solidly based on three key conceptual pillars that govern the assessment.

The first pillar is the official authoritative estimate, which represents the exact budget allocated to the tasks that should ideally be completed by a given calendar date.

The second pillar is the metric quantification of actual progress, which translates the physical work actually completed into its pre-approved monetary equivalent in the foundational documents.

Finally, the third pillar groups the authentic and undeniable accounting disbursements incurred by the organization to achieve that physical progress.

For example, if ten kilometers of public road were planned to be paved for one hundred thousand foreign currency, but only five kilometers were completed with a surprise expenditure of eighty thousand, the authorized estimate differs drastically from the actual progress measured and the authentic disbursements recorded in the books.

Calculation of variances, performance indices and interpretation of project health

From these three fundamental pillars described above, the strategist calculates precise numerical ratios that diagnose the true tactical efficiency of the work group involved.

Variances are obtained by subtracting actual expenditures from quantified progress. A negative result constitutes a critical management alarm that evidences a severe cost overrun or an unacceptable time delay.

Additionally, important performance ratios are calculated by dividing these same accounting variables.

If the resulting ratio is less than absolute unity, the organization faces severe inefficiencies that are rapidly destroying business profitability.

By employing these accurate and objective statistical formulas, the manager can project highly reliable forecasts of the final cost of the job if the team maintains the current rate of execution.

This mathematical transparency greatly empowers managers to adjust their preventive strategies on an empirically based basis, ensuring that the construction design culminates in a successful and financially sound manner at all points in