EVM and Project Procurement - Research Paper Example

This management system provides trends of cost, value and risk. EVM uses a uniform unit of measure of project performance which may either be dollars or work hours but for different tasks it may require different measure of performance. Functional Difference Procurement is often required in every project; therefore procurement management is a crucial step in the execution of a project plan. Procurement means the use of external vendors and service providers for a particular facility. Procurement management itself involves extensive planning.

Procurement process can be broken down into various steps which are widely used in the following order: Planning and requirement, requisition, vendor selection, contract administration, delivery and contract closure. Procurement process starts with the analysis of the goods and services required for the execution of a project. The management has to take a make or buy decision which ultimately decides whether there is a need for outsourcing or not. This is done through cost benefit analysis. For example leasing a piece of equipment costs $800/day and making it costs $12000; in this case the use of that equipment in terms of time would allow the management to compare the two costs and ultimately allow them to take an informed decision.

Difference in Cost Variance and Measurement In order for the successful completion of a project the management needs to answer certain questions repeatedly. These questions are mostly related to cost variance, risks, over or under expenditure, schedule and project performance in terms of value, cost and schedule. In a research study has proven the link between project success and earned value management. The study treats the principles of EVM and project procurement as two different variables.

The third variable is the project success itself. The results of their study and surveys supported their hypothesis with exception which is “There will be no significant difference between fixed-price and cost-plus contracts on the use of EVM’s performance metrics during contract administration” (Marshall, 2007). Fixed-price contracts and cost plus contracts are two prevalent contract types which are undertaken during the contract administration step of procurement management. So the study has proven that contract type does not significantly affect the performance metrics of EVM.

Earned value minus actual cost gives the cost variance and earned value minus planned value gives the schedule variance in earned value management. These variances are dependent upon the accuracy of estimates, time required for the project and life-cycle phase. All of these factors may fall under the category of procurement process so procurement management may affect the performance metrics of earned value management. Procurement involves market knowledge on the basis of which estimates are driven.

So if for example the management provides unreliable estimates then it would greatly affect the EVM measures such as planned costs. Secondly the length of the procurement project and total approved budget effect the capacity of EVM to accurately predict the trends of cost and