Earned Value Management (EVM) Formulas
Essential Metrics for Project Performance Assessment
This lesson provides a comprehensive overview of the core metrics used in Earned Value Management (EVM). As a PMP, you know EVM is the standard methodology for assessing project performance by integrating scope, schedule, and cost. It uses a set of fundamental terms and powerful formulas to provide a clear, objective picture of project health.
🔑 Part 1: Foundational EVM Metrics (The Pillars)
These three monetary values are measured as of a specific status date in the project.
| Metric | Full Name / Terminology | Definition |
|---|---|---|
| PV | Planned Value | The budget for the work planned to be completed by the status date. "How much work should have been done?" |
| EV | Earned Value | The budget for the work actually completed by the status date. "What is the value of the work done?" |
| AC | Actual Cost | The money spent to achieve the work actually completed. "How much money was spent?" |
Note on Terminology:
- BCWP (Budgeted Cost of Work Performed) is the older term for EV.
- ACWP (Actual Cost of Work Performed) is the older term for AC.
📈 Part 2: Performance Indices (Efficiency)
These ratios measure efficiency. A value greater than 1.0 is considered favorable (good).
| Index | Formula | Interpretation |
|---|---|---|
| CPI | $$ \text{CPI} = \frac{EV}{AC} $$ | Cost Efficiency: If CPI > 1.0, you are Under Budget. For every $1 spent, you earned more than $1 in value. |
| SPI | $$ \text{SPI} = \frac{EV}{PV} $$ | Schedule Efficiency: If SPI > 1.0, you are Ahead of Schedule. You completed more work than planned. |
🔮 Part 3: Forecasting (The Future)
Using current performance to predict the final budget and remaining work.
| Metric | Formula | What It Predicts |
|---|---|---|
| EAC | $$ \text{EAC} = \frac{BAC}{CPI} $$ | Estimate At Completion: Predicted total project cost, assuming current performance continues. |
| ETC | $$ \text{ETC} = \text{EAC} - \text{AC} $$ | Estimate To Complete: How much more money is needed to finish the work. |
Alternative Scenarios (Advanced)
Scenario 1: Variances are One-Time
If past issues were an anomaly and future work will follow the original plan:
Scenario 2: Critical Cost & Schedule Constraints
If both CPI and SPI will influence the remaining work (worst case):