Earned value management (EVM) is a method for measuring project performance that compares three figures at a given point in time: the value of work that was scheduled, the value of work actually completed, and what that completed work cost to produce. It separates a schedule problem from a cost problem, so a project shows up as behind schedule, over budget, or both, instead of a single "over budget" verdict.
The core figures
- Planned Value (PV) is the budgeted cost of the work that was scheduled to be done by this point.
- Earned Value (EV) is the budgeted cost of the work actually completed by this point.
- Actual Cost (AC) is what that completed work really cost.
- Cost Performance Index (CPI) is EV divided by AC; above 1.0 means the work is costing less than budgeted.
- Schedule Performance Index (SPI) is EV divided by PV; above 1.0 means more work is complete than planned.
A worked example
A project has a total budget of $1,000,000 and is six months into a twelve-month programme. $500,000 of work was scheduled to be complete by now, but only $450,000 worth has actually been finished, and that work has cost $480,000 to produce.
| Metric | Value |
|---|---|
| Planned Value (PV) | $500,000 |
| Earned Value (EV) | $450,000 |
| Actual Cost (AC) | $480,000 |
| CPI (EV / AC) | 0.94 |
| SPI (EV / PV) | 0.90 |
A CPI of 0.94 means the project is getting about 94 cents of completed work for every dollar spent, a mild cost overrun. An SPI of 0.90 means only about 90% of the scheduled work is actually done, so the project is also running behind programme. The two numbers together point to a project that needs attention on cost and on progress.
Where EVM shows up in a cost report
EVM figures are usually reported alongside the standard budget-versus-actual columns in a cost report: PV and EV add the schedule dimension, while AC lines up with the actual cost already tracked in the budget. CPI and SPI then feed a forecast of the final cost and completion date if current performance continues unchanged.
Related terms: Variance Analysis, Cost-to-Complete">Cost-to-Complete, Cost Value Reconciliation (CVR) (CVR), Actual Cost of Work Performed (ACWP) (ACWP).
Planyard doesn't label its reporting as EVM, but its live cost value reconciliation tracks the same budget, committed cost and actual cost figures that CPI and SPI are calculated from. See cost value reconciliation software.
FAQs
How does EVM help in forecasting project completion?
CPI and SPI show how performance has differed from the plan so far, and that trend can be applied to the remaining budget to estimate the final cost and completion date well before the project is close to finished.
Is EVM applicable to all construction projects?
Formal EVM reporting is more common on larger or publicly funded projects, where it's sometimes a contract requirement. Smaller contractors can still track the same PV, EV and AC comparison informally without running a full EVM system.