EVM in simple terms
Earned value management (EVM) is a project management method that compares three things: what you planned to have done, what you have actually done, and what it cost. Combining scope, schedule and cost into common money-based measures lets you see whether a project is ahead or behind and over or under budget. It is a measurement technique, and the indicators it produces are often used as project KPIs, though EVM itself is a method rather than a single KPI.
The three core values
- Planned value (PV): the approved budget for the work scheduled to be done by a given date. Older terminology calls it BCWS (budgeted cost of work scheduled).
- Earned value (EV): the budgeted value of the work actually completed by that date. Older name: BCWP (budgeted cost of work performed).
- Actual cost (AC): what has actually been spent on the work done so far. Older name: ACWP (actual cost of work performed).
EV is the unusual one: it is not money spent but the budget value of completed work. If a task was budgeted at 1,000 and is finished, it has earned 1,000 regardless of what it cost.
Budget and forecast terms
- Budget at completion (BAC): the total planned budget for the whole project.
- Estimate at completion (EAC): a forecast of the total final cost. There are several ways to calculate it. A common one, if current cost performance is expected to continue, is BAC divided by CPI.
- Estimate to complete (ETC): the forecast cost of the remaining work, often EAC minus AC.
- Variance at completion (VAC): the expected difference between budget and final cost, BAC minus EAC.
- To-complete performance index (TCPI): the cost efficiency needed on the remaining work to hit a target. One common version is (BAC minus EV) divided by (BAC minus AC).
Variances
A variance is a difference, expressed in money.
- Schedule variance (SV) = EV minus PV. Positive means ahead of schedule, negative means behind.
- Cost variance (CV) = EV minus AC. Positive means under budget, negative means over budget.
Performance indices
An index is a ratio, so it can be compared across projects of different sizes.
- Schedule performance index (SPI) = EV divided by PV. Above 1 suggests ahead of plan, below 1 behind.
- Cost performance index (CPI) = EV divided by AC. Above 1 suggests getting more value per unit of money than planned, below 1 the reverse.
Worked example
A project has a BAC of 100,000. At the end of month 4 the plan called for 40,000 of work (PV = 40,000). The team has completed work worth 30,000 of budget (EV = 30,000) and has spent 35,000 (AC = 35,000).
- SV = 30,000 - 40,000 = -10,000 (behind schedule)
- CV = 30,000 - 35,000 = -5,000 (over budget)
- SPI = 30,000 / 40,000 = 0.75
- CPI = 30,000 / 35,000, about 0.86
- EAC (if the trend continues) = 100,000 / 0.86, about 116,700
The project is behind and over budget, and the forecast suggests an overrun unless performance changes.
Quick reference
| Term | Meaning | Formula |
|---|---|---|
| PV | Planned value | Budget for scheduled work |
| EV | Earned value | Budget for completed work |
| AC | Actual cost | Money spent |
| SV | Schedule variance | EV - PV |
| CV | Cost variance | EV - AC |
| SPI | Schedule performance index | EV / PV |
| CPI | Cost performance index | EV / AC |
| EAC | Estimate at completion | e.g. BAC / CPI |
| VAC | Variance at completion | BAC - EAC |
Common questions
What is the definition of earned value in project management?
The budgeted value of the work that has actually been completed to date.
Is EVM a KPI?
EVM is a method. Its outputs, such as CPI and SPI, are often tracked as KPIs. For a goal-setting alternative, see OKRs. See the management terms list for KPI and related terms.
How do you work out earned value?
Multiply the percentage of work completed by the budget for that work. How “percentage complete” is judged varies by organisation, and the approach matters for accuracy.
Project governance terms such as scope, change request and risk register are defined in our business analyst terminology guide.