Earned Value Management
(Alias: EVM, cost/schedule control systems criteria - C/SCSC)
Earned Value Management (EVM) is a project performance measurement technique that provides an accurate comparison of the actual work performed against that planned. It achieves this by placing a baseline value on each deliverable at project commencement and crediting the project with that value when the deliverable is completed. This facilitates early identification of variances from plan allowing management to take corrective action before problems escalate.
The essential elements of the technique are as follows:
- Establish the baseline plan. In the planning phases of a project a target value is assigned to each scheduled element of work (usually some physical deliverable). This is called the "Planned Value (PV)".
- Allocate earned value. As the elements of work are completed their original Planned Values are classed as "earned", hence the term "Earned Value (EV)". The cumulative Earned Value across all completed work elements provides an accurate measurement of the value of work performed at any point in time.
- Measure variances from plan. Project performance can now be measured by comparing Earned Value with what has been spent to perform the work (Actual Cost - AC) and what was scheduled to be accomplished (PV). Refer to Earned Value Variances.
- Determine the criticality of variances. Earned Value indices provide further insights into the relative magnitude (and criticality) of cost and schedule variances. Refer to Earned Value Indices.
- Forecast project outcomes. Earned Value metrics can also be used to forecast the outcome of a project. Refer to Earned Value Forecasts.
The EVM technique is used in project management only. EVM metrics assume a project with a fixed set of deliverables conducted over a defined period in time. EVM is therefore not useful in managing continuous business operations.
Earned Value Metrics
Earned Value Variances
Cost Variance (CV)
= Earned Value (EV) - Actual Cost (AC)
> 0 means under budget
< 0 means over budget
Schedule Variance (SV)
= Earned Value (EV) - Planned Value (PV)
> 0 means ahead of schedule
< 0 means behind schedule
Earned Value Indices
Cost Performance Index (CPI)
> 1 means better progress for the money
< 1 means less progress for the money
Schedule Performance Index (SPI)
> 1 means more work performed than scheduled
< 1 means less work performed than scheduled
Project Percent Complete
= (EV/BAC) * 100
Percent of project work complete.
Where BAC = Budget at Completion
To Complete Performance Index (TCPI)
The cost performance index required to complete the project on budget.
Comparing CPI and TCPI at any point in a project gives a unique insight into the likelihood of a project completing on budget. For example if a project is running at a CPI of 0.8 with a TCPI of 1.2 required to complete on budget; such a step change is unlikely without major management intervention.
Earned Value Forecasts
Estimate at completion (EAC)
The estimated total cost at project completion.
Variance at completion (VAC)
The estimated variance between actual total cost and planned total cost at project completion.