It has been said that Earned Value Management (EVM) came about because the federal government often used "cost-plus" contractors with project organization. Cost-plus contracting allows the contractor to recover full project development costs plus accumulate profits from these contracts. Why would requiring contractor firms to employ Earned Value Management help the government hold the line against project cost overruns?
What are the main advantages of using EVM as a project control mechanism? What do you perceive as its disadvantage?
Why would requiring contractor firms to employ Earned Value Management help the government hold the line against project cost overruns?
Under the traditional cost-plus contracting there is no incentive for the contractor to save on project related costs. All costs are incurred as appropriate and there is really nothing driving the contractor to conserve cost as the contractor knows that all cost related overruns will be reimbursed by the federal government. ...
The solution provides a brief description of the advantages and disadvantages of EVM. An example is also provided pertaining to why federal government has discontinued the use of cost plus contracting in most cases and adopted EVM.