Earned Value and Capital Project Management

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As the new global era of megaprojects has arrived, upgrading the capabilities necessary to manage an increasingly costly, complex, and diverse set of infrastructure projects has become recognized as a priority in public management. To put the growth of traditional infrastructure spending in perspective, between 2011 and 2013, China used more cement than the United States did in the entire 20th century. However, infrastructure projects are not just getting more costly, they are becoming more complex with the proliferation of large-scale Information Technology (IT) acquisitions. The need to develop effective project management strategies is critical to avoid the consequences of the “Iron Law of Megaprojects: Over budget, over time, under benefits, over and over again” (Flyvbjerg, 2017).

The purpose of this article is to explain how Earned Value Management (EVM), a practice with an extensive history of application in the U.S. federal government, can serve as an effective management and budgeting tool for state and local governments. EVM is a project management strategy that provides an integrated solution for establishing project milestones, generating timely measures of cost and schedule performance, and analyzing results. The potential benefits of EVM application include early warning of cost overruns and schedule delays, opportunity for corrective action and mitigation of risk, and more consistently delivering “on time and on budget”. The U.S. Department of Defense (DoD) imported EVM from private industry in the 1960s to more effectively control and manage major acquisitions. Since then, EVM has become a required management and budgeting tool for U.S. federal agencies and evolved to be an internationally recognized best practice in project management.

In my doctoral program at the University of Georgia, I am writing a dissertation about EVM in U.S. state governments that provides original research on EVM use, contributions to project management, and factors critical to effective implementation. So far, I have surveyed statewide project management offices that are responsible for large-scale IT acquisitions and conducted interviews with several experts. Early results indicate that EVM is used for large-scale IT acquisitions in the states, but that it is not implemented as consistently as it is in the federal government. The majority of states have indicated that EVM provides early warning of cost overruns and schedule delays, helps realize performance objectives, and facilitates corrective action. However, experts have indicated that several factors are decisive in realizing these benefits, such as adopting EVM industry standards, tailoring practices to align with project risk, conducting independent reviews of performance baselines, providing training programs, and linking corrective action plans to EVM indicators.

Local governments can use EVM for a variety of infrastructure projects, such as water and sewer, transportation, and construction of major facilities. To get started, industry standards should be adopted, such as those issued by the Project Management Institute. However, it is critical to note that EVM is not a one-size fits all strategy and requires disciplined project management. Therefore, practices should be tailored according to project size, risk, and complexity and implemented by trained or certified project managers.

References
Flyvbjerg, B. (2017). The Oxford handbook of megaproject management (First edition. ed.): Oxford University Press.

Article Written By:
Andrew J. Grandage
GFOA Student Chapter

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