Earned Value Management (EVM) is a project management technique used to assess project performance by comparing planned work with actual work completed and costs incurred. It integrates scope, schedule, and cost to provide a comprehensive view of project health. Below is an overview of EVM and its key formulas.
Key EVM Metrics
1. Planned Value (PV): The budgeted cost of work scheduled to be completed by a specific time.
Formula: PV = Planned % Complete × Budget at Completion (BAC)
2. Earned Value (EV): The budgeted cost of work actually completed by a specific time.
Formula: EV = Actual % Complete × BAC
3. Actual Cost (AC): The actual cost incurred for the work completed by a specific time.
Formula: AC = Sum of all costs incurred
4. Budget at Completion (BAC): The total budget for the project.
Formula: BAC = Total planned budget
Performance Variances
5. Cost Variance (CV): Measures cost performance by comparing earned value to actual cost.
Formula: CV = EV – AC
Positive CV indicates under budget; negative CV indicates over budget.
6. Schedule Variance (SV): Measures schedule performance by comparing earned value to planned value.
Formula: SV = EV – PV
Positive SV indicates ahead of schedule; negative SV indicates behind schedule.
Performance Indices
7. Cost Performance Index (CPI): Measures cost efficiency of work completed.
Formula: CPI = EV / AC
CPI > 1 indicates cost efficiency; CPI < 1 indicates cost overrun.
8. Schedule Performance Index (SPI): Measures schedule efficiency.
Formula: SPI = EV / PV
SPI > 1 indicates ahead of schedule; SPI < 1 indicates behind schedule.
Forecasting Metrics
9. Estimate at Completion (EAC): Forecasts the total project cost based on performance to date.
Common Formulas:
- If current performance is expected to continue: EAC = BAC / CPI
- If future work will be at planned rate: EAC = AC + (BAC – EV)
- If both cost and schedule impact future work: EAC = AC + [(BAC – EV) / (CPI × SPI)]
10. Estimate to Complete (ETC): Estimates the remaining cost to complete the project.
Formula: ETC = EAC – AC
11. Variance at Completion (VAC): Predicts the budget overrun or surplus at project completion.
Formula: VAC = BAC – EAC
Positive VAC indicates under budget; negative VAC indicates over budget.
12. To-Complete Performance Index (TCPI): Measures the cost performance required to meet a specific budget goal (BAC or EAC).
- Formula for BAC: TCPI = (BAC – EV) / (BAC – AC)
- Formula for EAC: TCPI = (BAC – EV) / (EAC – AC)
TCPI > 1 indicates harder-to-achieve efficiency; TCPI < 1 indicates easier-to-achieve efficiency.
Remember that EVM assumes accurate tracking of scope, schedule, and costs. Regular updates to EV, PV, and AC are critical for reliable metrics. Use EVM data to make informed decisions, such as reallocating resources or revising schedules.
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