Beyond the EVM Fundamentals

Abstract

Despite the ever growing positive attention to EVM, the use of earned value metrics has been questioned by various authors when it is applied to highly complex and/or innovative projects. Indeed, EVM rests on a fundamental assumption that project activities and precedence relations are known in advance, and hence, assumes a project setting where estimates (activity duration, resource requirements, unexpected events, etc.) can be given within a certain range. However, projects often do not fulfil these assumptions but, on the contrary, are commonly plagued by fundamentally unforeseeable events and/or unknown interactions among various actions and project parts (Loch et al, 2006). The straight application of the standard EVM metrics and methods is certainly insufficient for projects where these assumptions do not hold. We refer to the book by Loch et al (2006) for a more general framework where the authors position and classify the sources of risk by the foreseeability of the underlying influence factors and by the complexity of the project. We also cite the letter to the editor of Harvard Business Review from Cooper (2003) as a response to the article written by Fleming and Koppelman (2003). In this letter, the author argues that the use of earned value management can be questioned when it is applied to highly complex projects. Due to the cycles of rework, the accuracy of the EVM metrics can be biased, leading to incorrect management decisions.