Earned value management formulas, explained with one example

The three inputs

• Planned value (PV): the budgeted cost of the work scheduled to be done by now.
• Earned value (EV): the budgeted cost of the work actually completed.
• Actual cost (AC): what the completed work actually cost.
• Budget at completion (BAC): the total budget for the project.

Variances and indices

Every formula starts with EV. Negative variances and indices below 1.0 are bad news.

• Cost variance CV = EV − AC. Cost performance index CPI = EV ÷ AC.
• Schedule variance SV = EV − PV. Schedule performance index SPI = EV ÷ PV.

A worked example

A project has a BAC of $800,000. By now, $400,000 of work was planned (PV), $340,000 of work has been completed (EV), and it cost $425,000 (AC).

CV = 340,000 − 425,000 = −$85,000, and CPI = 340,000 ÷ 425,000 = 0.80: every dollar spent earns 80 cents of work. SV = 340,000 − 400,000 = −$60,000, and SPI = 0.85: the project is behind schedule.

Forecasting the finish

Which estimate at completion (EAC) to use depends on whether past performance will continue. If the overspend is expected to continue, EAC = BAC ÷ CPI = 800,000 ÷ 0.80 = $1,000,000. If it was a resolved one-off, EAC = AC + (BAC − EV) = 425,000 + 460,000 = $885,000.

• Estimate to complete ETC = EAC − AC.
• Variance at completion VAC = BAC − EAC.
• To-complete performance index TCPI = (BAC − EV) ÷ (BAC − AC): the efficiency needed on the remaining work to finish on budget.