Relationships between Project Scope, Budget, and EVM

Introduction
Earned value management (EVM) is a process that enables managers to measure more effectively project performance by looking at work planned and work performed, forecasting costs, and controlling the schedule. As Vandevoorde and Vanhoucke (2006) state, it is a method to “measure and communicate the real physical progress of a project and to integrate the three critical elements of project management (scope, time and cost management)” (p. 298). EVM, in other words, is a kind of tool that a project manager, acting as a kind of mechanic, uses to keep the steering in alignment—i.e., it keeps the project scope and budget firmly managed and where both need to be. This paper will explain in detail how this relationship between scope, budget and EVM works by comparing and contrasting the relationship between project scope to the project budget and EVM, using the destination wedding event planning project for the WBS.
Work Breakdown Structure (WBS)
Scoping the Project
In destination wedding event planning, the scope of the project is enormous: the site has to be booked months in advance, prepped and readied; the musical act has to be booked; the catering has to be arranged, the hosting has to be orchestrated; photography, seating, and so on are all aspects of the event planning that must be arranged. There are numerous parties involved in the arrangement of the event. At the top is the business owner, working with the event sponsor/client or the steering committee. The project manager/team works below and interacts with reference groups, working parties (staff) and consultants. The governance structure looks like this:
Figure 1: Governance Structure for Destination Wedding Event Planning
WBS as Foundation for EVM
WBS is the foundation of EVM (Xu, 2009), just as an outline is the foundation of an essay: it provides the overview or road map—the parameters—of what the project is, where it is going, and which groups are responsible for what portions of the project. The whole aim of the project is defined and the sum of the parts equals the whole. The WBS identifies the level of work within the project, the activities, tasks or milestones that are to be completed, the % of the work that is expected to be completed, who or which groups are assigned to complete the tasks, the duration that it is expected for them to take to complete their assignment, and the predecessor task required to be finished before this one can commence.
In destination wedding event planning, meeting with the client is the first stage, followed by selecting the destination, choosing a theme, selecting guests, meals, music, and program. Preparation is then delegated to the designated groups to accomplish each task individually within the given time frame.
Planning the Project
Planning the project is the most vital stage, as this is the period where the six constraints of project management are identified and considered: 1) schedule, 2) customer satisfaction, 3) quality, 4) scope, 5) risk, and 6) resources (Westerveld, 2003). The planning phase sets the schedule, places the customer’s satisfaction at the top as the end goal, details the quality of the event, sets the scope, identifies the risks, and measures the resources available within the timeframe required.
Scheduling an Earned Value Project
Scheduling for performance management is an essential part of EVM as well: as Iqbal, Akbar and Budhwar (2015) point out, performance management is critical because it identifies and defines the goal for all parties, measures performance, appraises the work with milestones and goals checked off as the project progresses, and provides feedback for workers so that they know whether they are meeting or not meeting expectations. Scheduling the EVP is essential ahead of time as it provides a pre-arranged time frame in which measurements can be expected to be taken, in which goals and milestones can be expected to be reached.
Earned Value Baseline (EVB)
The baseline execution index is a tool to measure the efficiency with which work has been accomplished with respect to the baseline. This helps stakeholders to see whether expectations are being met, whether more focus or direction is required in one particular area, or whether tasks are being met on time and on budget. The EBC is the sum of all control account plans—the subprojects, teams and project subdivisions.
How Budget, Scope and EVM Interact
How Project Scope Relates to EVM
Mutually supportive. Project scope relates to the EVM in a mutually supportive way by providing the parameters in which the EVM is situated. The scope sets the terms of what expectations are, who should meet what, and when milestones should be achieved. The EVM provides restraint on scope: it keeps the vision from growing beyond the bounds of what the project team can accomplish.
Divergence. The two diverge in terms of vision: the vision might initially call for a larger scope; the EVM will be required to reign in the vision and keep the scope at a certain threshold. If the two do not align in this way, divergence occurs and the project can fail. Scope and the EVM must work in unison like hand in glove; otherwise, the project—in this case the destination wedding event—will come to nothing: either the client wants more than the project team can provide or the project team is unable to adhere to the vision. In either case, the project will not succeed.
How Project Scope Relates to Project Budget
Mutually supportive. Scope relates to budget in that the former serves as the foundation of the latter. The scope provides the area that the budget must encompass. Likewise, the budget gives the project a sense of the extent of the scope that is attainable. For the destination wedding, the budget of the client will necessarily impact the scope of the project. Likewise, the budget of the team will have to work within the confines of the scope. In other words, the two go together in a mutually supportive way, just like the foundation and framing of a house go to support the overall structure of the final product. Without these two, there can be no EVM, and without the EVM, these two can have no meaningful interpretation.
Divergence. Scope and budget may diverge in comparable terms to the manner in which scope and EVM may diverge. In this sense scope compares to EVM and to budget in the same manner. If the vision does not align with the proposed budget, “creativity” differences can be cited as a reason for incompatibility. Creativity is important, nonetheless, because it is what drives the project—so it can serve as a region of compromise, the area upon which project scope and project budget come to terms with the implications of the creative drive and make real-world decisions that will allow the project to come to fruition. Scope’s relationship with budget and EVM contrasts in the sense that the latter relationship focuses on the whole whereas budget strictly looks at the financial aspects of the project.
Together They Provide a Picture of Project Progress and Performance
EVM, project scope and project budget all come together to provide the total vision of the project, its feasibility, its requirements, its schedule, and a sense of the other six constraints that have to be considered. The combination of these elements gives dimension to the constraints of the project as well as serves to provide solutions. The risks of the project, for example, can be deduced by applying the EVM, scope and budget: the relationship of the three gives stakeholders an idea of what to expect; however, scheduling, is also significantly important, as little risk can be ascertained without a sense of how scheduling can alter everything, particularly in the case of destination wedding event planning, where so much rides on sites being available at a specific time, musical guests being available, the right kind of food being available for that season, and so on.
Conclusion
EVM allows the project manager to oversee the project’s progress in physical terms. Progress and performance are measured, with worker appraisals being given and performance management setting the goals and milestone that are to achieved according to the WBS. The WBS provides a map of who or which groups are performing what operations and by when. The overall project is thus mapped out so that all stakeholders see how all the parts fit together to produce the whole and so that any gaps in performance can be quickly identified and rectified, so long as the EVM, scope and budget relationship is upheld.
References
Iqbal, M. Z., Akbar, S., & Budhwar, P. (2015). Effectiveness of performance appraisal:
An integrated framework. International Journal of Management Reviews, 17(4), 510-533.
Le Masson, P., Hatchuel, A., & Weil, B. (2011). The interplay between creativity issues
and design theories: a new perspective for design management studies?. Creativity and Innovation Management, 20(4), 217-237.
Vandevoorde, S., & Vanhoucke, M. (2006). A comparison of different project duration
forecasting methods using earned value metrics. International Journal of Project Management, 24(4), 289-302.
Westerveld, E. (2003). The Project Excellence Model®: linking success criteria and
critical success factors. International Journal of Project Management, 21(6), 411-418.
Xu, B. (2009, December). Research on target cost management of construction project
with VBQ based on EVM. In Information Management, Innovation Management and Industrial Engineering, 2009 International Conference on (Vol. 3, pp. 427-430). IEEE.


KEY:



Direct relationships that may be managerial or contractual



(or both)







Indirect relationships that may exist in some circumstances.



They may also be managerial or contractual (or both).







Refenence Groups



Project Sponsor/ Steering Committee/

Business Owner



Consultants



Working Parties



Project Manager &



Team