Earned value management (EVM) is a technique that measures project performance against the project baseline by comparing planned value, actual costs, and earned value. EVM calculations can identify if a project is ahead or behind schedule and under or over budget. For example, if a project that is halfway complete has an earned value less than the planned value and a schedule performance index less than 1, it is behind schedule. EVM is considered a best practice but its use is inconsistent. While useful for measuring schedule and cost performance, EVM does not capture quality or customer satisfaction.

1. Earned Value Management
EarnedValue Management(EVM) isa technique thatmeasuresprojectperformance againstthe
projectbaseline.The EarnedValue calculationsare studiedandmemorizedbyall projectmanagers
seekingPMPcertification.However,their use inpractice isinconsistent.EVMisconsideredby
Cardinal tobe one of the “critical few”bestpractice areasfor monitoringprojectperformance from
botha cost andschedule perspective.
It iscommon tothinkabout projectswithbinarythinking:
 Aheadof schedule vs.Behindschedule
 Overbudgetvs.Under budget
Both projectperformance factorshave adirectimpacton the total projectcost.What will be the
total cost of myprojectif I'm aheadof schedule butmycostsare higherthanexpected?If I'mbehind
schedule butmycostsare lower?EVMprovidesgreatinformationtohelpwiththesequestions!
CalculatingEarned Value
Software packageslike MicrosoftProjectcanperformEarnedValue calculationsautomatically,and
theyare simple calculations thatcanquicklybe performedmanuallyasneeded.EarnedValue
calculationsrequire the following:
 PlannedValue (PV) =The budgetedamountthroughthe currentreportingperiod
 Actual Cost (AC) = Actual coststo date
 EarnedValue (EV) = Total projectbudgetmultipliedbythe % complete of the project
Withthese readilyavailable numbers,we're readytodosome calculations.
 Schedule Performance Index (SPI)calculation:SPI=EV/PV
SPImeasuresprogressachievedagainstprogressplanned.AnSPIvalue <1.0 indicateslessworkwas
completedthanwasplanned.SPI>1.0 indicatesthatmore workwas completedthanwasplanned.
 Cost Performance Index(CPI) calculation:CPI=EV/AC
CPImeasuresthe value of workcompletedagainstthe actual cost.A CPI value < 1.0 indicatesthat
costs were higherthanbudgeted.CPI>1.0 indicatesthatcostswere lessthanbudgeted.
For bothSPIand CPI,>1 is good and <1 is bad.Note thatif you’re ina hurry,that forboth Costand
Schedule,youcansubtractinsteadof dividingtogetthe variance.ScheduleVariance =EV - PV and
Cost Variance = EV – AC.Subtractingcan quicklybe done inyourhead,and forthese cases,>0 is
goodand <0 is bad.But unlike SPIandCPI,variance cannotbe effectivelycomparedacrossprojects

2. or overtime where the budgetfora projectmayhave changedbecause theyare relative tothe size
of the project.
 EstimatedatCompletion(EAC) calculation:EAC= (Total ProjectBudget) /CPI
EAC isa forecastof howmuch the total projectwill cost.
An Example
Let’stake a lookat an example.Assume thatwe are halfwaythroughayear-longprojectthathasa
total budgetof $100,000. The amountbudgetedthroughthis6-monthmarkis$55,000. The Actual
Cost throughthis6-monthmark is$45,000.
So insummary:
 PlannedValue (PV) =$55,000
 Actual Cost (AC) = $45,000
 EarnedValue (EV) = ($100,000 * 0.5) = $50,000
 Schedule Variance (SV) =EV – PV = $50,000 - $55,000 = -$5,000 (badbecause < 0)
 Schedule Performance Index (SPI)=EV / PV = $50,000 / $55,000 = 0.91 (badbecause < 1)
 Cost Variance (CV) =EV – AC = $50,000 - $45,000 = $5000 (goodbecause > 0)
 Cost Performance Index(CPI) =EV / AC = $50,000 / $45,000 = 1.11 (goodbecause > 1)
 EstimatedatCompletion(EAC) =(Total ProjectBudget) /CPI= $100,000 / 1.11 = $90,000
Because SV isnegative andSPIis< 1, the projectisconsideredbehindschedule.We are 50% of the
waythrough the project,buthave plannedfor55% of the costs to be used.There will have tobe
some catch-upin the secondhalf of the project.
Because CV ispositive andCPIis> 1, the projectis consideredtobe underbudget.We are 50% of
the way throughthe project,butour costs so farare only45% of our budget.If the projectcontinues
at thispace, thenthe total cost of the project(EAC) will be only$90,000, as opposedtoouroriginal
budgetof $100,000.
Pitfallsto Watch Out For
 Take care not to relysolelyonEarnedValue–itrepresentsasingle objectivedatapoint.EarnedValue
can change quicklyandactual costsand projectprogressrarelyoccur as budgeted.However,Earned
Value doesserve asanexcellentearly-warningsystem, andlookingatEarnedValue trendscan
provide veryuseful data.Itismostcommonto reportEarned Value monthly,butthiscouldbe more
frequentfora shorterproject.

3.  CustomerSatisfactionandQualityare notcapturedwithinEarnedValue calculations.WhileEarned
Value ishelpfulformeasuringprojectperformance relative toscheduleandbudget,itdoesnot
guarantee projectsuccess.
 It isimportantto make sure that all Actual Costsare includedinyourcalculations.Especiallywhen
usingsoftware like MicrosoftProject,somethingcouldbe overlooked(particularlyindirectlaborand
non-laborcosts).
 If you are reportingEarnedValue calculations,make sure the recipientsknow whatthe numbers
meanand howtheyare used.Irecommendpresentingtheminnon-projectmanagementtermsto
projectsponsorsandotherkeystakeholders.Thisismucheasierthantrainingstakeholderson
“projectmanagementspeak”(whethertheywantitor not).
These EarnedValue calculationscanhelpaProjectManageridentifyproblemsearlyandbe more
proactive asopposedto“after the fact” and reactive.EV metricsare definedinastandardmanner
and the data isavailable tobe reportedregularlyacrossthe projectportfolio.