EARNED VALUE MANAGEMENT (EVM) FORMULAS
Description Accronym Definition Formula Remarks
Budget at Completion, also called BAC, is the total amount of money that you’re expecting to spend to finish a
particular task or for the entire project. You arrive at this number by taking all of the estimates that you’ve
Budget at Completion BAC
already conducted and assumptions that you’ve made about things like schedule and work required and
adding them together.
Earned Value is a term that refers to the cost of the work that has been completed expressed as the value of
the performance budget assigned to that work. It’s not just the cost of the completing some work, it
Earned Value EV representing the value that has been earned by completing the work. This is commonly also referred to in the BAC * % Complete
construction industry as the “budgeted cost of work performed,” or BCWP. Earned Value is calculated as the
Budget At Completion multiplied by the Percent of Work Completed.
This term refers to the approved budget for work that is scheduled to be completed by a certain date in the
future. Whereas Earned Value takes a look at how much you spent to get work done by a certain time,
Planned Value is proactive in that it looks at how much you SHOULD HAVE spent at to get to a specified date.
Planned Value PV Planned Value is also referred to as Budgeted Cost of Work Scheduled or BCWS.
To find the Planned Value at any point in the project, simply add up all your planned costs up to that point.
Often, your planned costs are referenced from the project’s baseline.
As its name suggests, Actual Cost is a term used to describe the amount of money that you actually spent to
get a certain task done by a certain time. Many construction professionals also call this the “Actual Cost of
Actual Cost AC Work Performed,” or ACWP or just AC.
Like Planned Value, Actual Cost is a cummulative value that continues to grow as the project progresses.
Schedule Variance is a number that tracks how long you thought a task would take during planning versus how
long it actually took and how that relates to the money you’re spending. To find this number, begin with the
Schedule Variance SV EV – PV
Earned Value of your task and subtract from it the Planned Value. The number you’re left with is the amount
of money that delays have cost you and your team so far.
Cost Variance allows you to see the discrepancy between the amount of value that you earned on a task and
Cost Variance CV the actual cost that ask required to perform. To arrive at this number, take the Earned Value and subtract it EV – AC
from the Actual Cost.
Schedule Performance Index allows you to take a closer look at overall schedule efficiency on a project. It
SPI > 1, Ahead of Schedule
answers the question “am I using my time wisely?” SPI provides an instantaneous check on schedule at any
Schedule Performance Index SPI EV / PV SPI < 1, Behind Schedule
point in the project. To calculate SPI, take the Earned Value of your task or project and divide it by the
SPI = 1, On Schedule
Planned Value.
Cost Performance Index lets you look at not just how much money you’re spending to complete a project, but
CPI > 1, Under Budget
how well that money is being utilized. CPI provides an instantaneous check on cost performance at any point
Cost Performance Index CPI EV / AC CPI < 1, Over Budget
in the project. To find this number, take the Earned Value of your task or project and divide it by the Actual
CPI = 1, On Budget
Cost.
Estimate at Completion is a handy number to know because it allows you to estimate the total cost of a task
as of today, taking into account the work that you’ve already done. Take the approved budget that you have
Estimate at Completion EAC BAC / CPI
for the entire task and subtract from it the cost variance for all of the work that you’ve done to date. The
number you’re left with is your EAC.
The Estimate to Complete is the number that describes exactly what it will take to finish a particular task,
accounting for all of the work that you’ve done up to this point. There are a few different formulas you can use
to estimate the effort to complete a task in terms of using Earned Value.
If you already have calculated EAC, then ETC is easy to complete. Take the Estimate at Completion and
EAC – AC
subtract from it the Actual Costs to Date. This is the most common ETC formula used in Earned Value.
Another way to express Remaining work is in terms of what we’ve earned already. This formula assumes that,
BAC – EV
regardless of what happened up until now, we will finish the remaining work at the planned rate.
Since we are estimating the work to be completed, it often makes sense to take into account how we’ve
performed so far. If we’ve performed well or poorly so far, there’s a strong likelihood we’ll continue that same
Estimate to Complete ETC execution of the remaining work.
(BAC – EV) / CPI
Here, we take the previous formula and influence it with CPI, our cost performance to date. If CPI > 1, then
our ETC value will reflect the good performance. If CPI < 1, then ETC will be skewed towards the previous
poor performance to date.
This last formula is the most sophisticated since it incorporates both CPI like the previous formula, AND SPI. In
the same fashion as the previous formula, we are influencing our ETC calculation by our to-date cost AND
schedule performance. Here, we multiply CPI and SPI together to create a new rate that reflects the following
idea:
(BAC – EV) / (CPI * SPI)
If we’ve been executing poorly to-date, then we will likely execute the remaining work even MORE poorly. If
we’ve been executing the work strongly, we will likely execute the remaining work even better. It’s almost like
there’s an acceleration factor in this calculation.
Understanding how efficiently the remaining resources must be used to meet the project’s budget or Estimate
at Completion (EAC).
TCPI > 1 indicates that future work
TCPI provides a realistic view of the performance needed to reach financial goals, helping project teams adjust must be more efficient than planned
course as needed to control costs and maintain efficiency. to meet BAC or EAC.
To Complete Performance Index TCPI
TCPI < 1 suggests that future work
Use this when the goal is to complete the project within the original budget. (BAC - EV) / (BAC - AC) can be less efficient to meet BAC or
EAC.
Use this when the project is not tracking to finish within the original budget, and EAC has been updated. (BAC - EV) / (EAC - AC)