IPMA International Project Management Association
9 July 2018 / 7:58

ISO 21508 Earned value management in project and programme management released

Earned Value Management (EVM) emerged as a financial analysis specialty in United States Government programs in the 1960s, but it has since become a significant branch of project management and cost engineering. The construction industry was an early commercial adopter of EVM. Closer integration of EVM with the practice of project management accelerated in the 1990s [https://en.wikipedia.org/wiki/Earned_value_management].

Recently, a new international standard has been released by the International Organization for Standardization (ISO), the ISO 21508 “Earned value management in project and programme management”. It provides guidance for practices of earned value management in project and programme management. The standard is applicable to any type of organization including public or private and any size or sector, as well as any type of project or programme in terms of complexity, size or duration.

The document provides a) terms and definitions; b) descriptions of the purpose and benefits of earned value management; c) the integration and relationship with project or programme management; d) an overview of the processes and process descriptions; e) basic requirements for an earned value management system; and f) use of an earned value management system. However, it does not provide guidance on the use of specific processes, methods or tools in the practice of earned value management. The annexes describe examples of cost, schedule and performance analysis, commonly used formulae with associated interpretations, and the integration of earned value with other project or programme management processes.

Earned Value Management is a method that integrates project or programme scope, actual cost, budget, and schedule for assessment of progress and performance. EVM is used for the purpose of control and analysis of projects and programmes. It facilitates analysis and decision-making for budget, schedule, human resources, materials and other aspects.

A respective management system for EVM may include communication of the status from metrics established for the project or programme, improvements, corrective action development, and a common framework and vocabulary. Achieving a consistent view of performance metrics, the EVM system should integrate baselines established for projects and programmes including the scope of work that should be defined through the work breakdown structure, and performance measurement baseline. This system should also allow for formal, controlled incorporation of changes in baselines, authorized users and procedures.

To implement such a system, the project or programme control metrics and processes should be documented and understood in the organization or the organizations doing the work. The system should be established to allow systematic review of the data, common assessment methodologies, targeted levels of performance, and an assessment feedback process. It reviews should provide confirmation that the scope of work has been accounted for, quantified in terms of cost and schedule with the necessary structures for project or programme control.

There are also limitations for the application of EVM [https://en.wikipedia.org/wiki/Earned_value_management]. Because EVM requires quantification of a project plan, it may be perceived to be inapplicable to discovery-driven or agile projects (e.g. in software development). Furthermore, traditional EVM is not intended for non-discrete (continuous) effort. In traditional EVM standards, non-discrete effort is called “level of effort” (LOE). If a project plan contains a significant portion of LOE, and the LOE is intermixed with discrete effort, EVM results may not be exactly right.

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Author of this post

Reinhard Wagner has been active for more than 35 years in the field of project-related leadership, in such diverse sectors as Automotive, Engineering, and Consultancy, as well as various not-for-profit organizations. As Managing Director of Tiba Managementberatung GmbH, a leading PM Consultancy in Munich/Germany, he supports executives of industrial clients in transforming their companies towards a project-oriented, adaptive and sustainably successful organization. Reinhard Wagner has published 36 books as well as several hundred articles and blog posts in the field of project, program and project portfolio management. In more than 20 years of voluntary engagement he served the German Project Management Association (GPM) as well as the IPMA in various roles and was granted for his international commitment with the Honorary Membership of several IPMA Member Associations.