How Do Project Managers Use Earned Value Management to Track Budget Performance?

What is the Best Technique for Comparing Planned vs. Actual Costs in Predictive Projects?

Learn how Earned Value Management (EVM) helps project managers evaluate budget performance by comparing planned costs with actual costs in predictive projects. Discover why EVM is essential for identifying variances and taking corrective action.

Question

You are the project manager for a large infrastructure project following a predictive project management approach. As the project progresses, you need to evaluate how well the project is performing against the planned budget. You want to compare the planned costs with the actual costs to identify any variances and take corrective action if needed. Which technique should you use to compare the planned costs with actual costs over time in a predictive project?

A. Earned Value Management (EVM)
B. Monte Carlo Simulation
C. Root Cause Analysis

Answer

A. Earned Value Management (EVM)

Explanation

Earned Value Management (EVM) is a widely used methodology in predictive project management for measuring project performance and progress in an objective manner. It integrates project scope, schedule, and cost measures to help the project management team assess and measure project performance and progress. EVM allows project managers to compare the planned value (the planned cost of the work scheduled), the actual cost (the cost incurred for the work performed), and the earned value (the value of the work actually performed). By comparing these metrics, project managers can identify variances from the baseline plan, such as cost overruns or schedule delays, and take necessary corrective actions to get the project back on track.