Earned Value Management Formulas

Why This Matters

Earned Value Management (EVM) is the project management profession's most powerful diagnostic toolkit—it's how you answer the questions stakeholders always ask: Are we on schedule? Are we on budget? What will this actually cost when we're done? On the PMP exam and in real-world practice, you're being tested on your ability to interpret these metrics, not just calculate them. Understanding the relationships between planned value, earned value, and actual cost lets you diagnose project health at a glance and forecast where things are headed.

These formulas fall into distinct categories: baseline measurements, variance analysis, efficiency ratios, and forecasting calculations. Each serves a different purpose in the project control process. Don't just memorize the formulas—know what each metric tells you, when to use it, and how they connect to each other. When an exam question describes a project scenario, you should immediately recognize which formula applies and what the result means for project decisions.

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The Three Foundation Metrics

Every EVM calculation builds from three core measurements that capture what you planned, what you accomplished, and what you spent. Master these first—everything else is derived from them.

Planned Value (PV)

• The budgeted cost of work scheduled—represents how much work should be done by a specific point according to your baseline plan
• Time-dependent baseline metric that changes as you move through the project timeline; also called Budgeted Cost of Work Scheduled (BCWS)
• Foundation for schedule analysis—without an accurate PV, you cannot measure whether you're ahead or behind schedule

Earned Value (EV)

• The budgeted cost of work actually performed—measures the value of completed work in dollar terms, regardless of what you spent
• Progress indicator that tells you what percentage of the budget's worth of work is done; also called Budgeted Cost of Work Performed (BCWP)
• Central to all EVM calculations—EV appears in every variance and index formula, making it the most critical measurement to get right

Actual Cost (AC)

• Total costs incurred for completed work—what you've actually spent to achieve the earned value, including labor, materials, and overhead
• Reality check against the plan that captures all direct and indirect costs; also called Actual Cost of Work Performed (ACWP)
• Foundation for cost analysis—comparing AC to EV reveals whether you're getting value for your spending

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Variance Analysis

Variances tell you how much you've deviated from the plan in absolute terms. A variance is simply a subtraction—positive is good, negative is bad. These are your first-line diagnostic tools.

Schedule Variance (SV)

• Formula: $SV = EV - PV$—measures the schedule deviation in dollar terms, not time units
• Positive SV means ahead of schedule (you've completed more work than planned); negative means behind schedule
• Limitation: SV becomes unreliable near project end since EV eventually equals BAC regardless of delays—use SPI for trending

Cost Variance (CV)

• Formula: $CV = EV - AC$—measures how efficiently you're converting budget into completed work
• Positive CV means under budget (you've spent less than the value earned); negative means overspending
• Most reliable cost indicator throughout the project lifecycle—doesn't suffer from the end-of-project distortion that affects SV

Variance at Completion (VAC)

• Formula: $VAC = BAC - EAC$—forecasts the expected budget surplus or deficit at project completion
• Positive VAC predicts finishing under budget; negative VAC signals a projected overrun requiring management attention
• Strategic planning metric used for stakeholder communication and deciding whether corrective action is needed

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Efficiency Ratios (Performance Indices)

Performance indices express efficiency as ratios, making them ideal for trending and comparison. Values greater than 1.0 are favorable; less than 1.0 indicates problems. These are your most powerful diagnostic tools.

Schedule Performance Index (SPI)

• Formula: $SPI = \frac{EV}{PV}$—measures schedule efficiency as a ratio of work completed to work planned
• SPI > 1.0 means ahead of schedule; SPI < 1.0 means behind; SPI = 1.0 means exactly on schedule
• Trending indicator that helps forecast completion dates—multiply remaining duration by $\frac{1}{SPI}$ for adjusted timeline

Cost Performance Index (CPI)

• Formula: $CPI = \frac{EV}{AC}$—measures cost efficiency as the value received per dollar spent
• CPI > 1.0 means under budget (getting more than a dollar of value per dollar spent); CPI < 1.0 means overspending
• Most critical EVM metric—research shows CPI stabilizes by the 20% completion point and rarely improves more than 10% thereafter

To-Complete Performance Index (TCPI)

• Formula: $TCPI = \frac{BAC - EV}{BAC - AC}$—calculates the required future efficiency to finish within budget
• TCPI > 1.0 means you must improve efficiency to meet budget; the higher the number, the harder the recovery
• Decision-support metric—if TCPI exceeds 1.2-1.3, recovery is typically unrealistic and a baseline change may be needed

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Budget and Forecasting Metrics

These formulas help you look forward—predicting final costs and remaining work based on current performance. They're essential for stakeholder reporting and go/no-go decisions.

Budget at Completion (BAC)

• The total approved budget for the project—your performance measurement baseline representing 100% of planned scope
• Fixed reference point that doesn't change unless a formal baseline revision is approved through change control
• Denominator in forecasting formulas—BAC anchors calculations for EAC, VAC, and TCPI

Estimate at Completion (EAC)

• Forecasts total project cost at completion—multiple formulas exist depending on assumptions about future performance
• Most common formula: $EAC = \frac{BAC}{CPI}$—assumes current cost efficiency will continue; use when variance is typical
• Alternative formulas include $EAC = AC + (BAC - EV)$ for atypical variances and $EAC = AC + \frac{BAC - EV}{CPI \times SPI}$ when both schedule and cost matter

Estimate to Complete (ETC)

• Formula: $ETC = EAC - AC$—represents the expected cost to finish all remaining work
• Forward-looking budget requirement that tells stakeholders how much more funding is needed
• Resource planning essential—ETC drives decisions about staffing, procurement, and cash flow for project completion

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Quick Reference Table

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Self-Check Questions

1. If a project has $EV = \$50,000$, $PV = \$60,000$, and $AC = \$45,000$, what do the SV and CV tell you about project status? Which situation is more concerning and why?

2. Compare SPI and CPI: Both use EV as the numerator—what does each ratio's denominator represent, and what does it mean when they point in opposite directions?

3. A project manager calculates TCPI = 1.35. What does this value indicate, and what recommendation might you make to the sponsor?

4. Which three EAC formulas should you know, and what assumption about future performance does each one make?

5. Why does Schedule Variance (SV) become an unreliable indicator near project completion, and what metric should you use instead for schedule trending?