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EIA 748 - Earned Value Management Systems

Foreword
The earned value management system guidelines incorporate best business practices 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 re-planning as may be required. The guidelines in this document are purposely high level and goal oriented as they are intended to state the qualities and operational considerations of an integrated management system using earned value analysis methods without mandating detail system characteristics. Different companies must have the flexibility to establish and apply a management system that suits their management style and business environment. The system must, first and foremost, meet company needs and good business practices.

Appreciation is extended to the team that drafted this standard and to the individuals and professional organizations that supported the initial development efforts. The team that prepared and coordinated the original guidelines was an industry team staffed and chaired by members of the Management Systems Subcommittee of the National Defense Industrial Association.

INTRODUCTION
An Earned Value Management System (EVMS) for program management will effectively integrate the work scope of a program with the schedule and cost elements for optimum program planning and control. The primary purpose of the system is to support program management. The system is owned by the company and is governed by company policies and procedures. The principles of an EVMS are:

• Plan all work scope for the program to completion.
• Break down the program work scope into finite pieces that can be assigned to a responsible person or organization for control of technical, schedule and cost objectives.
• Integrate program work scope, schedule, and cost objectives into a performance measurement baseline plan against which accomplishments may be measured. Control changes to the baseline.
• Use actual costs incurred and recorded in accomplishing the work performed.
• Objectively assess accomplishments at the work performance level.
• Analyze significant variances from the plan, forecast impacts, and prepare an estimate at completion based on performance to date and work to be performed.
• Use EVMS information in the company's management processes.

The essence of earned value management is that at some level of detail appropriate for the degree of technical, schedule, and cost risk or uncertainty associated with the program, a target planned value (i.e., budget) is established for each scheduled element of work. As these elements of work are completed, their target planned values are "earned". As such, work progress is quantified and the earned value becomes a metric against which to measure both what was spent to perform the work and what was scheduled to have been accomplished. Schedule variances, which cannot be seen in a stand-alone budget versus actual cost tracking system, are isolated and quantified, and the cost variances are true cost variances that are not distorted by schedule performance. It is this ability to generate variances that differentiates EVM from traditional "budget versus actual cost" tracking systems. This provides for early identification of performance trends and variances from the management plan, and allows management decision making while there is adequate time to implement effective corrective actions. Without earned value, one can only compare planned expenditures with how much has been spent, which does not provide an objective indication of how much of the planned work was actually accomplished.

For the benefits of earned value to be fully realized, comprehensive planning at the outset, combined with the establishment and disciplined maintenance of a baseline for performance measurement are required. This combination of comprehensive planning, baseline maintenance, and earned value analysis yields earlier and better visibility into program performance than is provided by non-integrated methods of planning and control. This enhances overall program management value through decisions based on the use of EVMS information. EVMS scalability is viewed as spectrum employing the principles of EVMS as fundamental to all programs and the EVMS guidelines (Section 2) as applicable to large complex and/or high risk programs allowing any program regardless of size and complexity to realize the benefits of earned value management.