What is Earned Value Management (EVM)?

What is Earned Value Management?

Earned Value Management (EVM) is comprised of several formulas that provide an analysis of a project and its current state regarding budget and schedule. EVM provides a way to measure the project in a quantifiable way using project metrics. It may not always be ideal and it may sometimes be a hassle, but EVM helps paint a picture of the current direction a project is going in and whether it is on track to meet the planned goals.

Download a copy of the below table: EVM Cheat Sheet

Earned Value Management

EVM TERMS DEFINITION
Budget At Completion (BAC) The project’s budget
Planned Value (PV) The value of the work that should have been completed at any given point for the total project to remain on budget and schedule

 

PV = (Planned Percentage Completed) X BAC

Earned Value (EV) The estimated value of the work completed at any given point

 

EV = (Actual Percentage Completed) X BAC

Actual Cost (AC) The actual cost spent at any given point
Cost Variance (CV) The difference between the Earned Value (EV) and the Actual Cost (AC) that shows how much ahead or behind in the budget the project is at any given point

 

·         A negative CV is the amount the project is over budget

·         A positive CV is the amount the project is under budget

 

CV = EV – AC

Cost Performance Index (CPI) An indicator into the speed or rate of spending compared to the value being generated (Is the project budget on track)

 

·         CPI less than 1 shows the project is spending too fast and is over budget

·         CPI equal to 1 shows the project budget is on track

·         CPI greater than 1 shows the project is under budget

 

CPI = EV/AC

Schedule Variance (SV) The difference between the planned work completed versus the amount of work that was completed

 

·         A negative SV is an estimate of how much the project is behind schedule

·         A positive SV is an estimate of how much the project is ahead of schedule

 

SV = EV – PV

Schedule Performance Index (SPI) The indicator into the speed or rate of the work being getting completed compared to the work that was expected to be completed

 

·         SPI less than 1 shows the project as being behind schedule

·         SPI equal to 1 shows the project as being on track

·         SPI greater than 1 shows that the project is ahead of schedule

 

SPI = EV/PV

Estimate At Completion (EAC) Based on the current spending rate, EAC is an estimate of how much it will actually cost to complete the whole project

 

EAC = BAC/CPI

Estimate To Completion (ETC) Based on the current spending rate, ETC is an estimate of how much it will actually cost from a specified point forward to complete the project; it is simply the EAC minus the current actual costs

 

ETC = EAC – AC

Variance At Completion (VAC) The difference between the planned budget (BAC) and the new forecast budget (EAC)

 

VAC = BAC – EAC

To-Complete Performance Index (TCPI) An estimate of how hard it would be to meet the project’s objectives

 

TCPI (BAC – EV)/(BAC – AC)

 

 

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