The Earned Value-Driven Clue Generator

 

“You mentioned your name just now as if I should recognize it but I can assure you beyond the obvious facts that you are a bachelor, a solicitor and a Freemason, and an asthmatic, I know nothing about you whatever.”

                                                Sherlock Holmes, The Adventures of Sherlock Holmes[i]

GTIM Nation knows of my affection and respect for (properly implemented) Earned Value Management Systems, not just for individual projects, but entire portfolios. In my opinion, there’s simply no substitute for them in their capacity to effectively render accurate cost and schedule performance information from some remarkably easy-to-collect data points. I think it’s profoundly unfortunate that many of the thought leaders in the EV universe, some of whom I consider friends, have published works asserting that an entire codex of conditions must be met prior to such information streams being able to generate reliable management insights. It’s simply not so, but that’s a discussion for a future blog posting.

For now, though, I want to focus on some of the amazing things a properly-functioning EVMS can tell us, many of which aren’t taught in PM/Business Schools, but we’ll start with those basics anyway. For starters,

• EV – Actual Costs = Cost Variance. If positive, you are accomplishing work more efficiently than originally estimated. If negative, you’re not as efficient as baselined.
• EV – Cumulative Budget = Schedule Variance. If positive, you’re accomplishing more work than expected. Negative, and you’re falling behind.

The next set of insights I also consider to be basic:

• Positive Cost Variance, Positive Schedule Variance: Your performance is great!
• Positive Cost Variance, Negative Schedule: You’re efficient, not effective. Get on the gas!
• Negative Cost, Positive Schedule: You are accomplishing a lot, but it’s costing you. Get on the brakes (or at least ease off the gas).
• Negative Cost, Negative Schedule: Your Project is in trouble.

But here’s where things get interesting. Recall that your cumulative Earned Value amount is your Percent Complete multiplied by the Budget at Completion (BAC). Original U.S. Government-issued guidance on how PMs were to assess the Percent Complete figure listed seven methods, with five of them (Direct Units, Apportioned Effort, 0/100, 50/50, and Level of Effort) being immune to some sort of judgement call. In the event, the two remaining methods (Milestone Estimate and Weighted Milestone) are fairly common, and allow for the PM to, shall we say, add nuance to this data point. How can a PMO Director tell if her PMs are hedging the performance data? Some tells include:

• If the Cost Performance Index (EV / Actual Costs) is 1.0000 precisely, your PM is artificially setting the EV to the amount of Actual Costs. It’s likely that this person cannot be trusted to honestly convey the Project’s actual performance.
• Another (unfortunately) common nudging of the Percent Complete estimate can be detected by comparing the month-to-month changes in it. If the Project’s Percent Complete approaches 90% at a within-variance pace, but then dramatically slows down, with increments of only one percent (or less!) per month, be on the lookout for the possibility that the PM has been overclaiming performance this whole time. If the calculated Estimate at Completion begins to escalate (since the Actual Costs will continue to accumulate even as the EV barely moves), and the Variance Analysis Reports become more convoluted, real problems are right around the corner.
• Again comparing month-to-month figures, did the cumulative EV amount go up, but the Actual Costs stayed the same? Maybe in the report, but not in real life. Either the General Ledger failed to capture those costs, or no work was actually performed. Project performance is never free, unless your Team is comprised of volunteers.
• Many PMOs will allow their individual PMs to assert an Estimate at Completion (EAC) rather than have the cost processor automatically calculate one, or in addition to a calculated one. Once the Project has cleared the 20% complete point, the standard calculated EAC (EAC = BAC / CPI) is fairly reliable (typically, to within 10% of the Project’s final costs). If the calculated EAC is more than ten points higher than the PM’s version, go with the calculated one. I’ve seen this happen time and again, where a “surprise” overrun was easily foreseeable if the Portfolio Manager had simply calculated the EAC rather than take the PM’s word for it. Alas, by the time an artificially low EAC has been revealed, it’s almost always too late for senior management to intervene, much less remedy.

Generally speaking, I view Earned Value Management Systems’ detractors as falling into two categories: they are either legitimate PMs who have had bad experiences with so-called experts larding up the EVMS implementation with unnecessary layers of requirements on mandated systems (and, honestly, who could blame them for coming away with such an attitude?), and those PMs who detest EV’s ability to accurately depict their (lack of?) cost and schedule performance. When the latter category seeks to circumvent EV’s reliability, they leave clues behind, and one does not need Sherlock Holmes to see what’s been going on.

[i] Retrieved from https://www.quotes.net/mquote/880842 on August 6, 2025, 19:21 MDT