2.55 Earned Value Management (EVM) is a project performance management methodology that integrates scope, schedule and budget to establish a baseline against which performance is measured. Earned Value Management may also be used as a means by which progress payments may be quantified.
2.56 Payment by Earned Value implements progress payments using an objective measure, Earned Value, to quantify progress and represents only one of the payment options that may be considered by Project Managers to develop contract payment schedules.
2.57 Earned Value Payments, like progress payments, primarily address the cash flow required by the contractor to deliver the outcomes of the contract. Earned Value Payments provide for contractors to be paid progressively for work performed with the security that progress payments will be based on objective measures of performance defined as part of the Earned Value Management System (EVMS). Fourteen of the 28 MPR projects are either currently using or have used EVM as a payment, contract management method or tool.
2.58 DMO's preferred payment approach for major capital acquisition projects is through milestone payments, as this is a more appropriate way of ensuring the delivery of goods and services as specified in the contract.
2.59 Where projects evolve from a developmental stage through to a production phase, the payment methodology may also transition from time and materiel, focusing more on developmental input, to milestone payments which focus on more tangible deliverables. For projects requiring a relatively high degree of developmental work or investment it may be appropriate to make mobilisation payments (which take the form of pre-payments) to provide the contractor with funding to procure items required to fulfil obligations under the contract.