Should job margin be included in Planned Value when using EVM?

Cost Management Earned Value Management

Daniel Arnold Project Executive | Senior Project Manager| Exhibit Concepts, Inc. Oh, United States

I am putting together an EVM to train my PMO PMs. As I am putting this together I'm not sure if I ought to include our margin markup in this, or leave it out. To my way of thinking, PV is what I plan on spending - margin is what I plan on keeping, consequently, it seems as though any margin ought to be left out of the PV.
Would like your thoughts/practice on this, please.
Many thanks.

Posted: Dec 31, 2020 9:01 AM

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Keith Novak Tukwila, Wa, United States

Dec 31, 2020 1:56 PM

Replying to Daniel Arnold

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Keith, thanks for the thoughts. I chuckled at your comment, "the project can't be over yet...we still have budget left."

Relative to your comment about PMs not knowing what margin they need to hold - that makes me sad. I operate a different level and give my PMs the full picture and full authority over a project. Of course I keep close tabs on things (Trust, But Verify) but typically they appreciate the confidence and do really well. All of this stems from my commitment to invest, train and develop Project Managers.

We sometimes lament that we don't have better cost data to make fully educated business decisions, but sometimes that is for very sound business reasons.

In addition to the security factor, such as at a large publicly traded company, cost data can be expensive. My employer has several multi-billion dollar programs, each consuming millions of parts, purchased from thousands of suppliers. Vendor contracts often span many programs as one giant package. Breaking that down in more detail requires significant overhead. On government contracts by contrast, the accounting rules are much more precise, but that is far more expensive. It becomes a trade-off. How much information do you need to manage costs, vs. the cost of that information itself.

I've even managed "cost savings" projects where we learned after launch have a negative ROI, because it was less expensive to complete the project, than to change the vendor contract. The rationale there is our cost savings project turned into cost avoidance.

Posted: Jan 2, 2021 2:14 PM

Peter Rapin Subject Matter Expect; Project Delivery| Independent Consultant Ontario, Canada

Typically you would get cost data from the accounting department using payroll and supplier invoices. When you start factoring in overhead, profit margins, etc it adds an operation. Just make sure you are comparing apples and apples when doing gap analysis (estimated vs actual).

Posted: Jan 3, 2021 4:50 PM

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Should job margin be included in Planned Value when using EVM?

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