What is Earned value management (EVM)?
A technique for managing a project's progress and cost by comparing them on a monetary scale using the planned value (PV), earned value (EV) and actual cost (AC). The schedule performance index SPI = EV ÷ PV and the cost performance index CPI = EV ÷ AC are used to judge delays and budget overruns and to estimate the total cost at completion.
Japanese name: アーンドバリューマネジメント(EVM)
Earned value management (EVM) appears in 2 practice questions across 1 topic, including Software Development and Project Management.
Field: Software Development and Project Management
Variances and indices
The schedule variance SV = EV − PV and the schedule performance index SPI = EV ÷ PV describe progress, and the cost variance CV = EV − AC and the cost performance index CPI = EV ÷ AC describe cost. A negative SV (SPI below 1) means the project is behind schedule, and a negative CV (CPI below 1) means it is over budget. For example, with PV 500, EV 400 and AC 450, SPI = 0.8 (behind schedule) and CPI = 400 ÷ 450 ≈ 0.89 (over budget). Looking at both the differences and the ratios shows both the size of the problem and the efficiency.
Estimates at completion
If the current cost efficiency continues to the end, the estimate at completion is EAC = BAC ÷ CPI, where BAC is the budget at completion. In the example above, with a BAC of 1,000, EAC = 1,000 ÷ (400 ÷ 450) ≈ 1,125. If the overrun is considered temporary and the remaining work is expected to proceed on budget, EAC = AC + (BAC − EV) is used. Which formula to use depends on the cause of the overrun, so the decision is made together with an analysis of the cause, not from the numbers alone.
FAQ
Which is more important, SPI or CPI?
They are looked at together. If SPI is below 1 but CPI is 1 or above, the project is behind but cost-efficient, so there is room to catch up by adding people. If both are below 1, delay and overrun are happening at the same time, and the scope or plan often has to be revised.
How is earned value (EV) measured?
A budget is assigned to each work package in the WBS, and the budgets of the finished work are added up. Work in progress is counted by rules set in advance, such as the 50/50 rule (50% when started, 100% when finished) or the 0/100 rule (0% until finished), which makes the figures less dependent on individual judgment.