Earned Value Management Formulas to Know for Project Management

Earned Value Management (EVM) formulas are key tools in project management. They help track project performance by comparing planned work, actual progress, and costs. Understanding these formulas allows project managers to make informed decisions and keep projects on track.

1. Planned Value (PV)

   • Represents the budgeted amount for work scheduled to be completed by a specific time.
   • Used as a baseline to measure project performance against the planned schedule.
   • Helps in forecasting future performance and identifying potential delays.

2. Earned Value (EV)

   • Measures the value of work actually completed at a specific point in time.
   • Provides insight into project progress and performance relative to the planned value.
   • Essential for calculating variances and performance indices.

3. Actual Cost (AC)

   • Represents the total costs incurred for the work completed by a specific time.
   • Used to assess the financial performance of the project.
   • Critical for determining cost variances and performance indices.

4. Schedule Variance (SV)

   • Indicates the difference between earned value and planned value (SV = EV - PV).
   • A positive SV indicates ahead of schedule, while a negative SV indicates delays.
   • Helps project managers identify schedule performance issues early.

5. Cost Variance (CV)

   • Represents the difference between earned value and actual cost (CV = EV - AC).
   • A positive CV indicates under budget, while a negative CV indicates overspending.
   • Essential for assessing the financial health of the project.

6. Schedule Performance Index (SPI)

   • A ratio that measures schedule efficiency (SPI = EV / PV).
   • An SPI greater than 1 indicates the project is ahead of schedule, while less than 1 indicates delays.
   • Useful for forecasting future schedule performance.

7. Cost Performance Index (CPI)

   • A ratio that measures cost efficiency (CPI = EV / AC).
   • A CPI greater than 1 indicates the project is under budget, while less than 1 indicates overspending.
   • Important for evaluating overall project cost performance.

8. Budget at Completion (BAC)

   • The total budget allocated for the project, representing the planned cost at completion.
   • Serves as a reference point for measuring overall project performance.
   • Critical for financial forecasting and resource allocation.

9. Estimate at Completion (EAC)

   • Forecasts the total cost of the project at completion based on current performance (EAC can be calculated in various ways).
   • Helps project managers understand potential budget overruns or savings.
   • Essential for making informed decisions about project adjustments.

10. Estimate to Complete (ETC)

    • Represents the expected cost to complete the remaining work (ETC = EAC - AC).
    • Provides insight into future financial requirements for project completion.
    • Useful for budget management and resource planning.

11. Variance at Completion (VAC)

    • Indicates the difference between the budget at completion and the estimate at completion (VAC = BAC - EAC).
    • A positive VAC suggests the project will finish under budget, while a negative VAC indicates potential overruns.
    • Important for final project financial assessments.

12. To-Complete Performance Index (TCPI)

    • A ratio that indicates the cost performance required to complete the project within the budget (TCPI = (BAC - EV) / (BAC - AC)).
    • A TCPI greater than 1 indicates a need for improved cost efficiency to stay within budget.
    • Useful for guiding project management decisions and resource allocation.