EVM: Earned Value Management
Earned Value Management is a project management method to measure the
project’s performance, progress, and achievement based on cost, scope, and
schedule. It allows us to look at the three baselines by doing a series of calculations
and interpreting the results.
In Earned Value Management, there are three data sources:
– the budget (or planned) value of work scheduled
– the actual value of work completed
– the “earned value” of the physical work completed
Earned Value takes these three data sources and can compare the budgeted value of
work scheduled with the “earned value of physical work completed” and the actual
value of work completed.
Some terms
Planned Value (PV): Planned value is the authorized budget that is assigned to
complete the scheduled work.
Earned Value (EV): Earned value is the measure of actual work performed
expressed in terms of the budget authorized for that work.
Actual Cost (AC): Actual cost is the actual expenditure incurred for the work
performed on an activity during a specific time period.
Cost Variance (CV): Cost variance is the process of evaluating the financial
performance of the project. Cost variance is calculated as, CV= EV – AC.
Schedule Variance (SV): Schedule variance is the process of determining the
schedule performance of the project. Schedule performance is calculated as, SV=
EV – PV.
Cost Performance Index (CPI): The cost performance index is the measure of
the cost efficiency of budgeted resources. The cost performance index is
calculated as, CPI= EV/AC; CPI > 1 indicates the project is under budget and CPI
< 1 indicates the project is over budget.
Schedule Performance Index (SPI): The schedule performance index is to
measure the efficiency of the project schedule. The schedule performance index is
calculated as, SPI= EV/PV; SPI > 1 indicates the project is ahead of schedule and
SPI < 1 indicates the project is behind schedule.
Estimate at Cost: (EAC): Estimate at cost is the prediction of how much the
project will cost upon completion. Estimate at cost is calculated as, EAC= Budget
at completion (BAC)/CPI.
Estimate to Complete: (ETC): Estimate to complete is the amount required to
complete the remaining work. The estimate to complete is calculated as, ETC=
EAC-AC.
Item Questions
Planned Value (PV) How much work should be done?
Earned Value (EV) How much work was done?
Actual Cost (AC) How much did the work cost?
Budget at Completion (BAC) What is the total job budgeted to cost?
Estimate at Completion (EAC) What do we expect the total
Terms Calculations Number Remarks
Cost Variance (CV) EV - AC positive – good
Negative - bad
Schedule Variance EV - PV Positive - good
(SV) Negative - bad
Cost Performance EV / AC Above 1 - good
Index (CPI) Below 1 - bad
Schedule Performance EV / PV Above 1 - good
Index (SPI) Below 1 - bad
Estimate At Budget at
Completion (EAT) completion / CPI
Estimate Time to Original time estimate
Complete (ETC) / SPI
What’s reported
Cost Variance (CV) EV - AC Cost means Actual Cost
Schedule Variance (SV) EV - PV Schedule means Plan
Cost Performance Index (CPI) EV / AC Cost means Actual Cost
Schedule Performance Index (SPI) EV / PV Schedule means Plan
Forecasted
Estimate At Completion (EAC) Original Budget / CPI New total budget
Completion Date Estimate (CDE) Original Schedule / SPI New total time needed
