## A quick introduction to Earned Value Management System

What is Earned Value Management System?
Earned Value Management System  is a globally accepted comprehensive system  to track the progress of the project with respect to schedule and cost. It also helps to forecast the anticipated schedule and cost.

Acronyms of EV

Planned Value (PV) – Authorized budget assigned to planned work till the project review date. This is also known as Budgeted Cost of Work Scheduled (BCWS)

Earned Value (EV) – Authorized budget assigned to completed work till the project review date. Earned value is also known as Budgeted Cost of Work Performed (BCWP)

Actual Cost (AC) – Actual cost incurred for the work completed. AC is also known as Actual Cost Of Work Performed (ACWP)

Budget At Completion (BAC) – Total budget of the project from the start of the project till the end of the project

Schedule Variance (SV) = EV – PV. Schedule Variance is an indication of the amount by which the project is ahead or behind the planned delivery date

Schedule Performance Index (SPI) = EV / PV. If the SPI=1, then the project is right on schedule. If SPI<1, then the project is lagging behind. If SPI > 1, then the project is ahead of schedule.

Cost Variance (CV) = EV – AC. Cost Variance is the indication of the amount of budget deficit or surplus at a given point in time

Cost Performance Index (CPI) = EV / AC. If CPI=1, then the work is getting completed as per budget. If CPI>1, then the work is getting completed without consuming budget. If the CPI<1, then the work is getting completed by consuming more than budgeted.

Estimate At Completion (EAC) is a forecast of the money required to complete the total work of the project expressed as the sum of the actual cost incurred till date and the estimate to complete the balance work). There are multiple formulas to calculate EAC;

1. AC + (BAC – EV)
2. AC + re-estimated ETC
3. BAC / CPI
4. AC + ((BAC – EV) / (CPI * SPI))

Estimate To Complete (ETC) – The expected cost to complete the remaining project work. There are two ways to calculate this;

1. EAC – AC or
2. re-estimate ETC for the remaining work

Variance at Completion (VAC) = BAC – EAC

‘S’ Curve – A plot of the Planned Value, Earned Value and Actual Cost

To Complete Performance Index (TCPI) – What must be the target CPI to be maintained while performing the remaining work, to achieve the milestone within the original budget (BAC).

• Work remaining / Funds remaining
• To Complete Performance Index = (BAC – EV) / (BAC – AC)
• If the BAC is totally off track then TCPI = (BAC-EV) / (EAC – AC)

Smart tip to remember the basic EVM formula

SV=EV-PV, SPI=EV/PV, CV=EV/AC, CPI=EV/AC …In all these formula, Earned Value (EV) comes first.

## EVM Example

We are doing the review of the project after week#1. The following is a week wise list of tasks to be completed with their percentage completion

Planned value (PV) = Budgeted cost of work scheduled during week#1 = 6000

Earned value (EV)  = Budgeted cost of work performed during week#1  = 4950

Actual cost  (AC) = Actual cost of work performed = 4900

Budget at completion (BAC) = 12000

Schedule variance (SV) = EV – PV = 4950 – 6000 = -1050

Schedule Performance Index (SPI) = EV/PV = 4950/6000 = 0.825

Cost variance (CV)  = EV-AC = 4950 – 4900 = 50Cost Performance Index (CPI) = EV/AC = 4950 / 4900 = 1.01

Estimate at Completion (EAC)

1. BAC / CPI = 12000 / 1.01 = 11,881
2. AC + (BAC – EV) = 4900 + (12000 – 4950) = 11,940
3. AC + re-estimated ETC
4. BAC / CPI = 12000 / 1.01 = 11,881
5. AC + (BAC – (EV / CPI*SPI)) = 4900+(12000-(4950)/1.01*0.825)= 11,446

Estimate to Complete (ETC) = EAC – AC = 11446 – 4900 = 6546

Variance At Completion (VAC)  = BAC – EAC = 12000 – 11446 = 554

‘S’ Curve

To Complete Performance Index (TCPI)

(BAC – EV) / (BAC – AC) = (12000 – 4950) / (12000 – 4900) = 7050/7100 = 0.99

(BAC-EV) / (EAC – AC) = (12000-4950) / (11,446 – 4900) = 7050/6546 = 1.07
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