Earned Value Management (EVM)

Earned Value Management (EVM) integrates scope, time, and cost.

PV = Planned Value = Budgeted Cost of Work Scheduled (BCWS)

EV = Earned Value = Budgeted Cost of Work Performed (BCWP)

AC = Actual Cost = Actual Cost of Work Performed (ACWP)

BAC = Budget at Completion

EAC = Estimate at Completion

ETC = Estimate to Complete

Example:

Performance of Day 1 :

Data : PV = $1000, EV = $750, AC = $900, BAC = $4000

1. Schedule Variance (SV) = EV – PV

SV = $750 – $1000 = -$250

2. Schedule Performance Index (SPI) = EV / PV

SPI = $750 / $1000 = 0.75

3. Cost Variance (CV) = EV – AC

CV = $750 – $900 = -$150

4. Cost Performance Index (CPI) = EV / AC

CPI = $750 / $900 = 0.83 [Interpretation: For every $1, 17 Cents are being wasted]

Forecasting – As on date measurement. Its advantage is it gives alert.

1. For Entire Project

Estimate At Completion (EAC) = BAC / CPI

EAC = $4000 / 0.83 = $4819

2.For Remaining Project

Estimate To Complete (ETC) = EAC – AC

ETC = $4819 – $900 = $3919

To-Complete Performance Index (TCPI) – It is the new target of cost performance setup by the management.

TCPI = (Work Remaining in Money Terms) / (Fund Remaining) = (BAC – EV) / (BAC – AC)

TCPI = ($4000 – $750) / ($4000 – $900) = 1.05

TCPI Value:

> 1 : Performance need to be increased to stay within budget

< 1 : Performance can decrease to stay within budget

TCPI < 1 is preferred situation.