EVA Earned Value Analysis (EVA)

EVA

Earned value analysis (EVA) is "a quantitative project management technique for evaluating project performance and predicting final project results, based on comparing the progress and budget of work packages to planned work and actual costs" (Lukas, 2008). Vargas (2003) also wrote about the technique, and discussed specifically its use as a control mechanism for projects. Vargas divides his work into two parts, the first being about "the different features of each business and its contribution for the success or failure in the implementation of EVA," and the second is "about the characteristics of similarity found in all businesses that together favor or not the use of (EVA)."

Vargas presents a case study in the use of EVA as a control mechanism. The author recounts interviewing different levels of management at three construction projects, one of which that successfully implemented EVA and two of which that did not. The study attempted to seek out conclusions about the factors that contribute to the successful adoption of EVA and those that are important to explaining why the adoption of EVA was a failure in the other two projects.

There are a number of critiques that can be made about the Vargas article. Briefly, the author's lack of familiarity with the English language leads to clumsy, sometimes incoherent writing that either distorts or obfuscates the message, for example the vague, nonsensical clause "superior of the management potential of a construction site." One sincerely hopes something was merely lost in translation here. Writing skill aside, the author makes a bold, unsubstantiated reach when he attempts to "get evidence that could link the success or failure of the business to maturity in the use of Earned Value." The author clearly betrays his bias towards EVA as a control technique with such a statement. Moreover, with the vast number of variables both internal and external that contribute to business failure, it is foolish at best to seek out "maturity" in the use of a control technique as the defining factor of business failure. Statistical validation of such a hypothesis is all but impossible to obtain, and the flaw in Vargas' reasoning is that he does not make any such attempt. He uses interviews, which are inherently subject to bias, but only uses three of them. Where n = 3, achieving a statistical level of confidence is impossible. Further, "maturity" is a non-quantifiable concept, so even attempting to test this hypothesis quantifiably is absurd. Vargas would have been better to frame his work as a discussion paper, which is all it really is.

Setting aside the conclusion, which was reached without statistically-relevant supporting evidence, Vargas does explain fairly well how to improve the implementation of EVA. The conclusions section of the paper notes the variables that contribute to successful implementation of EVA as a control mechanism. He correctly identifies issues such as training, resistance to change and organizational support as key variables, for example. These findings are consistent with what one might expect from a case study analysis, which typically produces anecdotal evidence that can be scanned for generalized knowledge about the issue. In that respect, Vargas succeeds with his study.

A contrasting study comes from Lukas (2008) who argues why EVA does not work. He argues that EVA is not likely to succeed as a standalone technique. Instead, he notes, it needs to be used in conjunction with earned value management (EVM), which relies on a developed earned value management system (EVMS). Lukas' article is instructional in nature; it does not purport to be a research study. Instead, the author works from the premise that his ideas are correct and moves directly into what steps the organization needs to take in order to have a fully-functioning EVMS. Having the right measures in place, having means of making those measurements and having a team that can execute EVM effectively are all important.

Lukas does not build on Vargas' work so much as redoes it. Lukas does not begin with the idea of testing any hypothesis concerning the value of EVA; instead he takes that premise as a given and moves straight into the implementation. This is a strength of his work. Vargas eventually gets to the implementation, using his case study findings, but his findings are superficial in comparison to those of Lukas. There is nothing groundbreaking in knowing that resistance to using the technique will reduce its effectiveness, or that managers with low levels of training in EVA will not implement it as effectively. Those are common-sense conclusions. What Lukas has done with his work is to dive right into the key elements of an EVMS so that the audience understands exactly what needs to be done, on a specific level.