Failure Case of Earned Value Method (EVM): The “Absurd” of the Use of Management & Contingency Reserves Budgeting

Metallinos Pavlos ()
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Metallinos Pavlos: Ionian Islands Prefecture, Ionian Islands, Greece

Baltic Journal of Real Estate Economics and Construction Management, 2022, vol. 10, issue 1, 41-75

Abstract: The object of the research focuses on the use and application of the management reserves and contingencies of the hierarchical structure of the Earned Value Management System framework. The study explores logical failures of the method, which do not seem to have been recorded in the international literature. These failures do not seem to have been perceived, although they relate to variables that they identify and must ensure the accuracy of the results of the method, in the way this method is executed in application of EVMS standard/EIA 748. The derived failure of these variables leads to incorrect qualitative and quantitative calculation of Earned Value Method (EVM) calculations. Spoiled results in terms of the accuracy of their algebraic prices lead to erroneous and possibly more costly decisions by the actors in the production process; especially when it comes to borderline situations. Because of these failures, both the on-schedule handover time and the size of the expected rate of profit (IRR) on the part of the entrepreneur do not seem to be accurately predicted or measured at the end of the production process/handover. The cause is structural. It derives from the logic and the correlation of the individual components of Budget Element hierarchy. The study focuses on the logical contradictions and conceptual failures of the method. The author aims to highlight these specific failures with the purpose of achieving more effectively the uncertainty management and determining more accurately the risk algebraic value. Henceforth, the user is provided with an improved ability to manage the resources of the construction. This is ensured by the scientifically more accurately documented measurement of the production time and the construction cost of the technical project.

Keywords: Earned Value Management method; contingencies; management reserve; Performance Management Baseline (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:vrs:bjrecm:v:10:y:2022:i:1:p:41-75:n:1

DOI: 10.2478/bjreecm-2022-0004

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