SOFTWARE PROJECT MANAGEMENT

Earned Value Analysis (EVA) — Study Notes

Final Exam Preparation | UET Mardan

1. What is Earned Value Analysis?

EVA Definition: An objective method to measure project performance in terms of scope, time, and
cost.
EVA answers three core questions at any point in time:
• How much work did you PLAN to complete? → Planned Value (PV)
• How much work did you ACTUALLY complete? → Earned Value (EV)
• How much did you SPEND to complete the work? → Actual Cost (AC)

1.1 Why Not Just Use Traffic Light Reporting?

Traditional Green / Yellow / Red project health reports have several weaknesses:
• Subjective to interpretation and influence
• No objective measurement to guide project health
• A project can report Green and suddenly turn Red a few days before launch
• A project can be rationalized to Green without any objective data
• No prior indicators to problems — issues surface too late

EVA solves this by providing objective, data-driven metrics that detect problems early.

1.2 Traffic Light Ranges (Objective)

SPI and CPI values can be used to assign objective traffic light colors:
Color SPI / CPI Range Meaning

Green 1.0 – 0.95 Project on track

Yellow 0.94 – 0.85 Needs attention

Red 0.84 – 0.0 Serious problems

2. Core EVA Terms & Formulas
Term Full Name Definition

BAC Budget at Completion Total approved project budget

PV Planned Value Budgeted cost of work scheduled to be done by now

EV Earned Value Budgeted cost of work actually completed so far

AC Actual Cost Real cost/money spent so far

CV Cost Variance EV − AC (negative = over budget)

SV Schedule Variance EV − PV (negative = behind schedule)

CPI Cost Performance Index EV / AC (< 1 = cost inefficient)

SPI Schedule Performance Index EV / PV (< 1 = behind schedule)

EAC Estimate at Completion BAC / CPI (forecast of final project cost)

ETC Estimate to Complete EAC − AC (remaining cost to finish)

VAC Variance at Completion BAC − EAC (budget surplus or overrun)

TCPI To-Complete Performance (BAC − EV) / (BAC − AC)

Index

Exam Alert: Know all 12 terms above by name, formula, and interpretation. CV, SV, CPI,
SPI, EAC, ETC, TCPI are most commonly tested.

3. Formula Reference Sheet

Cost Variance (CV):
CV = EV − AC

Schedule Variance (SV):

SV = EV − PV

Cost Performance Index (CPI):

CPI = EV / AC

Schedule Performance Index (SPI):

SPI = EV / PV
 Estimate at Completion (EAC):
EAC = BAC / CPI
(if current trend continues)
EAC = AC + (BAC − EV)
(if future work at original budget)

Estimate to Complete (ETC):

ETC = EAC − AC

Variance at Completion (VAC):

VAC = BAC − EAC

To-Complete Performance Index (TCPI):

TCPI = (BAC − EV) / (BAC − AC)

Estimated Duration:
Estimated Duration = Original Duration / SPI

4. Interpretation Guide
Metric Value Meaning

CV Positive (> 0) Under budget — spending less than planned

CV Zero (= 0) Exactly on budget

CV Negative (< 0) Over budget — spending more than planned

SV Positive (> 0) Ahead of schedule

SV Zero (= 0) Exactly on schedule

SV Negative (< 0) Behind schedule

CPI =1 Every $1 spent yields $1 of value — efficient

CPI <1 Cost inefficient — getting less than $1 value per $1 spent

CPI <1 Cost efficient — getting more than $1 value per $1 spent

SPI =1 Progressing exactly as planned

SPI <1 Slower than planned — schedule delay

SPI >1 Faster than planned — ahead of schedule

 Metric Value Meaning

TCPI =1 Must work at exactly the same efficiency to meet budget

TCPI >1 Must work more efficiently — harder to recover

TCPI >> 1 (e.g. 5) Unrealistic — project will almost certainly exceed budget

5. Worked Example 1 — $10,000 Software Project

5.1 Given Data
Parameter Value

Budget at Completion (BAC) $10,000

Project Duration 4 weeks

Status at End of Week 3 50% complete

Planned Value (PV) $7,500 (75% of BAC — 3 of 4 weeks elapsed)

Earned Value (EV) $5,000 (50% of BAC — only 50% done)

Actual Cost (AC) $9,000 (actual spending to date)

5.2 Step-by-Step Calculations

Step 1 — Cost Variance (CV)
CV = EV − AC
CV = 5,000 − 9,000 = −$4,000

Interpretation: Negative → Over budget. Project has spent $4,000 more than the value of work
completed.

Step 2 — Schedule Variance (SV)

SV = EV − PV
SV = 5,000 − 7,500 = −$2,500

Interpretation: Negative → Behind schedule. Team has delivered $2,500 less work than planned by
Week 3.

Step 3 — Cost Performance Index (CPI)

CPI = EV / AC
CPI = 5,000 / 9,000 ≈ 0.56

Interpretation: CPI < 1 → Cost inefficient. For every $1 spent, only $0.56 worth of work is completed.
Step 4 — Schedule Performance Index (SPI)
SPI = EV / PV
SPI = 5,000 / 7,500 ≈ 0.67

Interpretation: SPI < 1 → Behind schedule. Team is progressing at only 67% of the planned rate.

Step 5 — Estimate at Completion (EAC)

EAC = BAC / CPI
EAC = 10,000 / 0.56 ≈ $17,857

Interpretation: If current inefficiency continues, project will cost ~$17,857 (78% over original budget).

Step 6 — Estimate to Complete (ETC)

ETC = EAC − AC
ETC = 17,857 − 9,000 ≈ $8,857

Interpretation: Team needs ~$8,857 more to finish the project at the current rate.

Step 7 — To-Complete Performance Index (TCPI)

TCPI = (BAC − EV) / (BAC − AC)
TCPI = (10,000 − 5,000) / (10,000 − 9,000) = 5,000 / 1,000 = 5.0

Interpretation: Team must work 5x more efficiently to finish within original budget. This is extremely
unrealistic.

Step 8 — Estimated Duration

Estimated Duration = Original Duration / SPI
Estimated Duration = 4 / 0.67 ≈ 6 weeks

Interpretation: At current pace, project will take ~6 weeks instead of 4 — a 2-week delay.

5.3 Summary of Findings

Metric Value Status

CV −$4,000 Over Budget

SV −$2,500 Behind Schedule

CPI 0.56 Cost Inefficient

SPI 0.67 Schedule Delay

EAC ~$17,857 Expected Final Cost

ETC ~$8,857 Additional Funds Needed

TCPI 5.0 Unrealistic Recovery Needed

 Metric Value Status

VAC −$7,857 Expected Budget Overrun

New Duration ~6 weeks 2-week Delay

Conclusion: Project is severely over budget and behind schedule. Without corrective
action it will cost ~78% more and take 50% longer. Recommend: investigate root causes
(scope creep, poor estimation), consider re-baselining.

6. Worked Example 2 — $100,000 Project (Practice)

6.1 Given Data
Parameter Value

BAC $100,000

PV $60,000

EV $50,000

AC $55,000

6.2 Solution
CV = EV − AC
CV = 50,000 − 55,000 = −$5,000 (Over Budget)

SV = EV − PV
SV = 50,000 − 60,000 = −$10,000 (Behind Schedule)

CPI = EV / AC
CPI = 50,000 / 55,000 ≈ 0.909 (Cost Inefficiency)

SPI = EV / PV
SPI = 50,000 / 60,000 ≈ 0.833 (Schedule Delay)

EAC = BAC / CPI

EAC = 100,000 / 0.909 ≈ $110,011 (Estimated higher cost if trend
continues)
7. Practice Problem 1 — $50,000 Project
7.1 Given
Parameter Value

BAC $50,000

Project Duration 10 weeks

Status After Week 6

PV $30,000

EV $25,000

AC $28,000

7.2 Questions
1. Calculate CV and determine if project is under/over budget.
2. Calculate SV and determine if project is ahead/behind schedule.
3. Compute CPI and SPI and interpret their meanings.
4. If current trend continues, what will be the EAC?

7.3 Solution
CV = EV − AC
CV = 25,000 − 28,000 = −$3,000 → Over Budget

SV = EV − PV
SV = 25,000 − 30,000 = −$5,000 → Behind Schedule

CPI = EV / AC
CPI = 25,000 / 28,000 ≈ 0.893 → Cost Inefficient

SPI = EV / PV
SPI = 25,000 / 30,000 ≈ 0.833 → Behind Schedule

EAC = BAC / CPI

EAC = 50,000 / 0.893 ≈ $56,000 → Expected Overrun of ~$6,000
8. Practice Problem 2 — $120,000 Agile Project
8.1 Given
Parameter Value

BAC $120,000

Sprints 8 total

Status After Sprint 5

PV $75,000

EV $60,000

AC $80,000

8.2 Questions
5. Calculate CV, SV, CPI, SPI and interpret their values.
6. Compute EAC under two scenarios: (a) current performance continues; (b) future work follows
original budget.
7. Calculate TCPI to meet the original budget. Is it feasible?
8. What actions should the project manager take to meet original budget?

8.3 Solution
Q1 — Variance and Performance Indices
CV = EV − AC
CV = 60,000 − 80,000 = −$20,000 → Over Budget

SV = EV − PV
SV = 60,000 − 75,000 = −$15,000 → Behind Schedule

CPI = EV / AC
CPI = 60,000 / 80,000 = 0.75 → Cost Inefficient

SPI = EV / PV
SPI = 60,000 / 75,000 = 0.80 → Behind Schedule

Q2 — EAC (Two Scenarios)

Scenario A — Current trend continues:
EAC = BAC / CPI = 120,000 / 0.75 = $160,000
 Scenario B — Future work at original budget:
EAC = AC + (BAC − EV) = 80,000 + (120,000 − 60,000) = 80,000 + 60,000 =
$140,000

Q3 — TCPI
TCPI = (BAC − EV) / (BAC − AC)
TCPI = (120,000 − 60,000) / (120,000 − 80,000)
TCPI = 60,000 / 40,000 = 1.5

Interpretation: Team must work 1.5x more efficiently for the rest of the project. Challenging but
potentially feasible with corrective action.

Q4 — Recommended Actions
• Investigate root causes: scope creep, poor estimation, resource issues
• Reduce scope — de-prioritize non-critical user stories
• Increase team velocity — address bottlenecks or add resources
• Re-baseline the project with revised estimates and timeline
• Negotiate additional budget or revised delivery date with stakeholders
• Improve process efficiency — eliminate waste in sprint ceremonies

9. Quick Reference — All Formulas

Formula Expression Positive = Good / Negative = Problem

CV (Cost Variance) EV − AC Positive = Under budget; Negative = Over

budget

SV (Schedule Variance) EV − PV Positive = Ahead; Negative = Behind

schedule

CPI (Cost Performance EV / AC = 1 efficient; < 1 over-spending; > 1 under-

Index) spending

SPI (Schedule Perf. EV / PV = 1 on track; < 1 delayed; > 1 ahead

Index)

EAC (Trend continues) BAC / CPI Forecast final cost if inefficiency persists

EAC (Future at orig. AC + (BAC − EV) Optimistic: remaining work done at planned
budget) rate

ETC (Estimate to EAC − AC Remaining funds needed to finish

Complete)

VAC (Variance at BAC − EAC Negative = budget overrun expected

Completion)

TCPI (BAC−EV)/(BAC−AC) > 1 = must improve efficiency; >> 1 =

Formula Expression Positive = Good / Negative = Problem

unrealistic

Est. Duration Orig. Duration/SPI If SPI < 1, project will take longer

SPM Notes — Earned Value Analysis | Final Exam Prep | UET Mardan