Earned Value Management – Metrics
The Earned Value Management (EVM) approach is associated with clear
communication of the project activities, which contributes to the achievement of greater
visibility and control of these activities.
The EVM approach encompasses other project metrics that can be calculated from the
concepts introduced above e.g. Planned Value (PV).
The indicators below are used to describe project’s schedule and cost
performance through the EVM approach:
• Schedule Variance (SV): The measure of the difference between the work done
against the amount of work planned to be done. Provides clear visibility if the
project is on schedule or not.
Schedule variance is calculated by subtracting Planned Value (PV) from Earned
Value (EV). A positive SV indicates a project ahead of schedule, a neutral SV
indicates that the project is on schedule and a negative SV indicates the project
is behind schedule.
Equation: SV = EV - PV
• Cost Variance (CV): The measure of the difference between the planned budget
for the work to be done and the amount that was spent. Provides information on
if the project is on budget or not.
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Cost variance is calculated by subtracting Actual Cost (AC) from EV. A positive
CV denotes the project is under the planned cost, a neutral CV or zero denotes a
project on planned cost and a negative CV denotes a project that has run over
the planned cost.
Equation: CV = EV - AC
• Schedule Performance Index (SPI): The ratio between the budget approved for
the work performed to the budget approved for the work planned. The SPI is a
relative measure of the efficiency of the project’s time.
The projects SPI is calculated by dividing EV by PV. A SPI value greater than 1
denotes a project that is efficient and ahead of schedule, a score of 1 denotes a
project that is on schedule and a score below 1 denotes a project running behind
schedule.
Equation: SPI = EV/PV
• Cost Performance Index (CPI): The ratio between approved budgets for the
work performed to the budget spent for the stipulated work. CPI is a relative
measure of the project’s cost efficiency. It can also estimate the task remainder’s
cost.
The projects CPI is calculated by dividing EV by AC. A CPI greater than 1
denotes a project delivering below the budget cost, a CPI equal to 1 denotes a
project that is delivering to the planned budget and a CPI below 1 denotes a
project that is delivering over the planned budget.
Equation: CPI = EV/AC
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There are other metrics that can be derived from the initial performance indicators
discussed above: Variance at Completion (VAC), Estimate at Completion (EAC),
Estimate to Completion (ETC), and To-Complete Performance Index (TCPI).
• Variance at Completion (VAC): Is a comparison of the budget set for the project
versus the budget estimated to complete the project.
It involves subtracting EAC from Budget at Completion (BAC). A positive
variance at completion denotes the project will be completed under the original
project budget. A neutral result denotes a project that is on track to meet the
original budget. A negative result denotes a project that will encounter cost
overruns.
Equation: VAC= BAC – EAC
• Expected Total Cost at Completion (EAC): The expected total cost of
completing all work expressed as the sum of the actual cost to date and estimate
to complete. This calculation consists of a number of different mechanism and
scenarios to calculate.
• Scenario 1: If the cost price index is set to remain constant for the
remainder of the project EAC can be derived by:
Equation: EAC = BAC/CPI
• Scenario 2: If all future project work will be completed at the planned rate
EAC can be derived by:
Equation: EAC = AC + BAC – EV
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• Scenario 3: If the initial plan is no longer valid or achievable EAC can be
derived by:
Equation: EAC = AC + Bottom-Up ETC
• Scenario 4: If the remaining work is influenced by both SPI and CPI, EAC
can be derived by:
Equation: EAC = AC + (BAC-EV)/ (CPI*SPI)
• Estimate to Completion (ETC): This metric focuses on the expected cost to
finish all remaining work on the project, it has two calculations to derive it
depending on the project’s status and progress.
• Scenario 1: The project is proceeding to plan.
Equation: ETC = EAC – AC
• Scenario 2: The project is not performing to plan, and the remaining work
needs to be re-estimated.
Equation: ETC = Re-estimate
• To-Complete Performance Index (TCPI): Details the cost performance that
must be met in order to deliver the project within the approved budget.
TCPI has two scenarios for calculation: on plan and on estimation. For both
calculations, a score greater than 1 denotes a project that will struggle to deliver
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within the approved budget. A score below 1 denotes a project that is easier to
compete.
Equation 1: TCPI = (BAC-EV) / (BAC-AC)
Equation 2: TCPI = (BAC-EV) / (EAC-AC)
