Earned Value Management (EVM) Formulas Explained

1. Introduction

Earned Value Management (EVM) is a powerful technique used in project management to measure project performance and progress. It helps project managers answer key questions such as:

• Are we on budget?
• Are we on schedule?
• How much more money and time will we need to complete the project?

This guide will cover 12 essential EVM formulas and explain how to use them.

2. Key EVM Formulas

Formula	Description	Formula Calculation	Example
Budget at Completion (BAC)	Total project budget.	No formula – given directly.	A construction project has a budget of $500,000.
Planned Value (PV)	Value of work planned to be completed by a specific date.	PV = Planned % Complete × BAC	At day 5 of a 10-day project with BAC of $10,000, PV = 50% × $10,000 = $5,000.
Earned Value (EV)	Value of actual work completed.	EV = Actual % Complete × BAC	If 60% of a $10,000 project is completed, EV = 60% × $10,000 = $6,000.
Actual Cost (AC)	Total cost incurred to date.	No formula – given directly.	If $5,500 has been spent so far, AC = $5,500.
Cost Variance (CV)	Budget performance (positive = under budget, negative = over budget).	CV = EV - AC	If EV = $6,000 and AC = $5,500, CV = $6,000 - $5,500 = $500 (under budget).
Cost Performance Index (CPI)	Efficiency of cost spending (CPI > 1 = under budget, CPI < 1 = over budget).	CPI = EV / AC	If EV = $6,000 and AC = $5,500, CPI = $6,000 / $5,500 = 1.09 (good).
Schedule Variance (SV)	Schedule performance (positive = ahead of schedule, negative = behind schedule).	SV = EV - PV	If EV = $6,000 and PV = $5,000, SV = $6,000 - $5,000 = $1,000 (ahead of schedule).
Schedule Performance Index (SPI)	Efficiency of schedule performance (SPI > 1 = ahead, SPI < 1 = behind).	SPI = EV / PV	If EV = $6,000 and PV = $5,000, SPI = $6,000 / $5,000 = 1.2 (good).
Estimate at Completion (EAC)	Forecasted total cost of the project.	EAC = BAC / CPI	If BAC = $50,000 and CPI = 0.9, EAC = $50,000 / 0.9 = $55,555.
Estimate to Complete (ETC)	Money required to complete remaining work.	ETC = EAC - AC	If EAC = $55,555 and AC = $30,000, ETC = $55,555 - $30,000 = $25,555.
Variance at Completion (VAC)	Difference between the original budget and the forecasted cost.	VAC = BAC - EAC	If BAC = $50,000 and EAC = $55,555, VAC = $50,000 - $55,555 = -$5,555 (over budget).
To-Complete Performance Index (TCPI)	Performance needed to complete within budget.	TCPI = (BAC - EV) / (BAC - AC)	If BAC = $50,000, EV = $20,000, and AC = $25,000, TCPI = (50,000 - 20,000) / (50,000 - 25,000) = 1.2 (must work harder).

3. Understanding EVM Indicators

• Cost and Schedule Performance:
• CPI & SPI = 1 → Project is on track.
• CPI & SPI > 1 → Project is under budget or ahead of schedule.
• CPI & SPI < 1 → Project is over budget or behind schedule.
• Forecasting Completion:
• EAC > BAC → Over budget.
• EAC < BAC → Under budget.
• Project Health:
• VAC > 0 → Project will have leftover budget.
• VAC < 0 → Project will exceed budget.

4. Summary

• EVM helps track project performance in terms of cost and schedule.
• Understanding the key formulas allows for better project forecasting.
• Knowing CPI, SPI, and EAC ensures project budgets and timelines remain controlled.
• Use variance analysis to proactively identify potential project risks.

By mastering EVM, project managers can make data-driven decisions to keep projects on track.