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Management

Earned Value Management and Project Procurement

Abstract

Project procurement is implemented during the execution phase of the project management life cycle.  This means that the groundwork for the project has been established and the project is ultimately underway in regard to scope, schedule and cost estimates.  Project procurement management plays a vital role in the process of the project in regard to procuring the necessary products, services or results needed to provide the requirements outlined in the project plan.  Project procurement management includes contract management, change control, administration of the contracts and provides the framework for meeting the obligations the company or individual representing the organization committed to.  This provides an opportunity for the project manager to view into the benefits the procurement and utilization of resources that progress the project toward completion.  This is done through monitoring the progress that is achieved versus the amount of resources required to achieve those objectives.  This is accomplished through the use of the Earned Value Management tool.  This insight provides the insight into the relationship between procurement and progress of a project.

Project Procurement

Procurement management is the identification and acquisition through the expenditure of resources to garner the necessary goods or services required to execute the project.  There are multiple steps within project procurement that go through the life cycle of the procurement process.  Procurement process brings two parties together with an aim of facilitating the exchange of goods and services (Fleming, 2003).  It entails a well-coordinated purchase mechanism for acquisition of goods and services from an external source which will enable the work to be done.  It brings together the aspects of contract management and control processes necessary to administer contracts or purchase orders.  It also includes processes that facilitate the administration of a contract for proper management of the relationship between the buyer and the seller.  This final deliverable will enable the project procurement framework to be followed to ensure the appropriate resources are used in the project to meet the demands of the scope.  The procurement of these assets and resources will be measured, monitored and ultimately controlled through the use of the Earned Value Management tool.

Project procurement management has four different processes that encompass the entire procurement management realm of responsibility.  These areas are the planning, conducting, administering and closing procurements.  Each area has a significant impact on the outcome of the project and each follow a specific standard framework to ensure compliance and an opportunity for success.  During the planning process the project team focuses on the purchasing decisions, outlines the approach and identifies the vendors that could potentially provide the goods, service or outcome the project needs.  Conducting the procurement phase focuses the resources of the team on obtaining requests for information, quotes and potentially using an auction type scenario to choose the best vendor for the requirement.  This is also the phase in which the contract is awarded to a specific vendor based on cost, quality and ability to meet the needs of the project.  After the contract is awarded the next phase or process framework is started.  The administration of the contract becomes a significant milestone of the project due to the fact that the contracts and relationships between the vendor and the project organization need varying levels of nurturing and attention.  This phase encompasses the management, monitoring and changes to a contract or engagement.  With all projects each must come to an end and that is the closing of the procurement management phase.  This entails ending and closing out all of the active contacts and ensuring the obligations are met by each party in the contract.

During each phase of the procurement management cycle there is a level of accountability and obligations that are expected from each party in the commitment.  While all of the phases require a level of achievement and performance it is during the administration phase of the procurement management cycle that can take advantage of some of the tools available to the project manager.  There is a corollary relationship between holding the project team accountable for the success of a project and the outcome of that project.  The more focus and deliverable oriented metrics the project team can be measured by the better insight into areas that need attention can be achieved.  This is also true with monitoring the progress of a project and the amount of resources allocated to procurement projects.  The Earned Value Management tool can provide the monitoring of the performance of a project while also providing the ability for the project team to implement actions to control the resources and put the right resources in the right place to achieve the optimal results.

Earned Value Management

Earned value management is a tool used to measure the performance of a project and how well the resources are being utilized to achieve certain goals, objectives and milestones.  With this tool, monitoring and controlling vital and limited resources becomes possible at the project manager level.  The planning and controlling of the project is highly impacted by the use the EVM tool and allows the reallocation, constriction or expansion of resources on certain activities to ensure critical deliverables are accomplished. The EVM tool allows the measurement of the three project constraints of scope, schedule and cost while analyzing the performance of the triple constraints against what is being accomplished on the project.  In a complex environment such as implementing new software solution across an entire business the utilization of agile methodologies has been decided.  With agile there are techniques used to provide EVM awareness and monitoring for such an implementation.  The use of trending planned value (PV), or the value of work planned to be completed, versus earned value (EV), value actually accomplished in the project, allows insight into the actual work being performed against the expected results.  The project manager would utilize the estimation tools such as creating work breakdown structures to understand what level of effort will be required to accomplish specific tasks (Miller 2009).

The project manager would also need to coordinate and integrate the dependent activities within the schedule to ensure they are lined up accordingly and in the correct process flow (Prencipe and Hobday 2007).  Once the planning phase of the project is complete and the project plan is created, scope is define, estimations of resources is completed and the associated plans regarding communications and risk are initiated the project manage would utilize monitoring and controlling tools such as earned value management, EVM.  EVM would measure the performance and progress of the project within the parameters of scope, schedule and cost. If the project procurement team allocates resources to contracts that do not fully align with the needs of the project or do not provide the adequate support, goods or services that is required those resources would not be fulfilling the needs of the project.  The value of the resources allocated would be diminished by the fact that the progress of the project was not achieved but the resources were expended.  This provides the project manager with the information to know what has been accomplished, the amount of resources utilized and if the project is in line with the estimations (Fleming and Koffleman 2010).

Implementation

The key to accurately and operationally implementing the earned value management tool is first to ensure the stakeholders and project team understand the value that the tool is providing.  The main deliverable of EVM is to show how well a project is performing in accordance to schedule and cost.  This provides the project team and key stakeholders the immediate opportunity to realign resources to provide support where it is needed before the project becomes troubled and ultimately result in a project that is over schedule, over budget and potentially reduced in scope to meet other criteria.

The relationship between procurement management and earned value management go hand in hand in creating a scenario for the project that ultimately leads to successful launch of the project.  The earned value management tool turns the data of the project into useful information that the project and leadership teams can utilize to make informed business decisions.  Earned value management is another tool in the project manager toolbox which can shed light on problem procurement projects and allow resources to be adequately, efficiently and effectively be allocated to the appropriate tasks to achieve the milestones needed for successful project completion.

References

Budd, C. I., & Budd, C. S. (2009). Earned value project management. (2nd ed.). Vienna, VA: ManagementConcepts.

Cooper, D. F., Grey, S., Raymond, G., & Walker, P. (2005). Project risk management guidelines, managing risk in large projects and complex procurements. John Wiley & Sons

Dobson, M. (2004). The triple constraints in project management. Vienna, VA: ManagementConcepts.

Fleming, W. (2003). Project procurement management, CA, FMC Press.

Fleming, Q. W., & Koffleman, J. M. (2010). Earned value project management. Project Management Institute.

Prencipe, A., Davies, A., & Hobday, M. (2007). The business of systems integration. Oxford University Press, USA.

Project Management Institute, P. M. (2008). A guide to the project management body of   knowledge. (4th ed.). Newtown Square: Project Management Inst.