An Excerpt:We all know about the three monkeys: See No Evil, Hear No Evil, and Speak No Evil. As project managers, our goals are to control our projects, be sure they come in on budget, and avoid any cost overruns. In order to do this, we must ignore the advice of the three monkeys. We need to see the potential for cost overruns, hear about the risks, and speak about the likelihood of failure BEFORE it actually occurs or we run out of budget.

Budget versus actual costs. Project ahead of schedule versus project behind schedule. Being told not to worry versus spending sleepless nights worrying. These factors have been used to manage projects in the past, yet can they alone describe the real health of a project? In a word, no. An earned value management tool is a valuable partner when determining the answers to these and many other questions about the ongoing state of a project. Earned value fills the need when project success and the success of the company hang in the balance in this fast-paced, budget-conscious 21st century.

Who Uses Earned Value Management?
Earned Value Management (EVM) is a methodology that has been in use since the 1960s when the US Department of Defense adopted it as a standard method of measuring project performance. Its principles were set down as Cost/Schedule Control Systems Criteria in the DoD™s financial management orders in 1967. However, the idea has actually been in existence since the 1800s when industrial engineers wanted a way to measure performance on the factory floor.

In August of 1999, Dr. Jack Gansler, USD(A&T), signed a memorandum announcing that the Department of Defense had adopted the ANSI EVMS Standard for use on defense acquisitions. The EVMS guidelines incorporate best business practices for program management systems that have proven to provide strong benefits for program or enterprise planning and control. The processes include integration of program scope, schedule and cost objectives, establishment of a baseline plan for accomplishment of program objectives, and use of earned value techniques for performance measurement during the execution of a program. The system provides a sound basis for problem identification, corrective actions, and management replanning that may be required (Gansler 1999).

Why Use Earned Value?
Have you ever asked yourself any of these questions?

• My actual costs are less than my budget. Is my project doing well, or is it behind schedule?
• My project's actual costs are now higher than budgeted, and the project is only halfway complete. What's it likely to cost at completion?
• My project manager or engineer keeps telling me not to worry about the cost overruns. The rest of the work will cost less than budgeted. Is this probable?
• Do I have the necessary staff for this new contract?
• Will labor rate and currency exchange rate fluctuations affect my project's costs?
• How will funding cuts affect my cash flow?
• Is price or usage causing my cost variance?

This paper looks at how an earned value software tool can help you to determine your project’s health and find answers to these questions.