Project Management

Earned Value Management ( EVM ) – Important Terms , Definitions and Formulas

Earned Value Management ( EVM ) – Important Terms , Definitions and Formulas

1. Budget at completion (BAC) – The total authorized budget for the project.

2. Planned value (PV) – The budgeted amounts assigned to work planned to have been  completed.

   Formula : PV = BAC × (time passed ÷ total schedule time)

3. Earned value (EV) – The value of completed work, expressed in terms of the budget assigned to that work.

    Formula : EV = BAC × (work completed ÷ total work required)

4. Schedule variance (SV) – The difference between earned value and planned value. This value indicates whether  project work is proceeding as planned in the schedule.

   Formula : SV = EV – PV

5. Cost variance (CV) – The difference between earned value and actual costs.

   Formula : CV = EV – AC

6. Schedule performance index (SPI) – The ratio between earned value and planned value, which represents schedule performance. An SPI of one indicates the project is on schedule. A value greater than one indicates it is ahead of schedule, and a value less than one indicates it is behind schedule.

 Formula : SPI = EV ÷ PV


7. Cost performance index (CPI) – The ratio between earned value and actual costs, which represents cost performance. A CPI value greater than one indicates better performance than expected, whereas a value less than one indicates poor performance.

 Formula : CPI = EV ÷ AC

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