PMP Earned Value Management (EVM) Calculation Explained

Basic EVM Formulas

To speak more clearly how the value is to be managed, a number of terms are defined in EVM (explained with the example of building 10 houses
each has a value of US$1000 expected to be completed in 10 weeks in proportion):

Planned Value (PV) — The budgeted value of the work completed so far at a specific date
example: at end of week 4, altogether 4 houses should be completed, the PV is US$4000

Earned Value (EV) — The actual value of the work completed so far at a specific date (refer to the “Notes on Earned Value Measurement”
section below)
example: by end of week 4, only 3 houses are completed, the EV is US$3000

Actual Cost (AC) — The total expenditure for the work so far at a specific date
example: by end of week 4, US$4000 was spend, the AC is US$4000

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PMP Earned Value Management (EVM) Calculation Explained

EVM is based on monitoring these three aspects along the project in order to reveal the health of the project with the following indices:

Schedule Variance (SV) — difference between PV and EV, to tell whether the project work is ahead of / on / behind schedule
SV = EV – PV
If the project is behind schedule the SV will be negative (i.e. achieved less than what planned)
If the project is on schedule the SV = 0
If the project is ahead of schedule the SV will be positive (i.e. achieved more than what planned)
example: by end of week 4, the SV = EV – PV = US$3000 – US$4000 = -US$1000 (behind schedule)

Schedule Performance Index (SPI) — ratio between EV and PV, to reflect whether the project work is ahead of / on / behind schedule in
relative terms
SPI = EV/PV
If the project is behind schedule the SPI < 1 (i.e. achieved less than what planned)
If the project is on schedule the SPI = 1
If the project is ahead of schedule the SPI > 1 (i.e. achieved more than what planned)
example: by end of week 4, the SPI = EV/PV = US$3000/US$4000 = 0.75 (behind schedule)

Cost Variance (CV) — difference between EV and AC, to tell whether the project work is under / on / over budget
CV = EV – AC
If the project is over budget the CV will be negative (i.e. achieved less than spent)
If the project is on budget the CV = 0
If the project is under budget the CV will be positive (i.e. achieved more than spent)
example: by end of week 4, the CV = EV – AC = US$3000 – US$4000 = -US$1000 (over budget)

Cost Performance Index (CPI) — ratio between EV and AC, to reflect whether the project work is under / on / over budget in relative terms
CPI = EV/AC
If the project is over budget the CPI < 1 (i.e. achieved less than spent)
If the project is on budget the CPI = 1
If the project is under budget the CPI > 1 (i.e. achieved more than spent)
example: by end of week 4, the CPI = EV/AC = US$3000/US$4000 = 0.75 (over budget)

Note both SV and SPI / CV and CPI give similar information on schedule / budget but the indices will give more insights into the actual performance
with a meaning comparison.

From my experience, the most difficult process of solving EVM problems for PMP® Exams is to identify the PV, EV and AC from the wordy
calculation questions. Then you will just have to recall the correct formula to substitute the values into to get the answer — the question will usually
ask you directly about the actual indices to get.

Advanced EVM Formulas

Budget at Completion (BAC) — also known as the project/work budget, that is the total amount of money originally planned to spend on the
project/work
example: the BAC for the housing project = US$1000 x 10 = US$10000

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PMP Earned Value Management (EVM) Calculation Explained

Estimate at completion (EAC) — as the project goes on, there may be variations into the actual final cost from the planned final cost, EAC is a
way to project/estimate the planned cost at project finish based on the currently available data
The following formulas can be used to calculate EAC based on which information and conditions given in the question:
EAC = BAC/CPI
If we believe the project will continue to spend at the same rate up to now

The delay is caused by reasons which is likely to continue (e.g. labour with less skilled than expected)
example: the EAC for the housing project = US$10000 / 0.75 = US$13333

EAC = AC + (BAC-EV)
If we believe that future expenditures will occur at the original forecasted amount (no more delays of the same kind in future)

The delay might be caused by some unforeseen reasons (e.g. typhoon) which is not likely to happen again
example: the EAC for the housing project = US$4000 + (US$10000 – $3000) = US$11000

EAC = AC + [(BAC-EV)/(SPI*CPI)]
If we believe that both current cost and current schedule performance will impact future cost performance

The performance of the project will continue with sub-prime standards (over budget and behind schedule)
This formula is less likely to be used for the PMP® Exam
example: the EAC for the housing project = US$4000 + [(US$10000 – $3000)/(0.75*0.75)] = US$16444

EAC = AC + New Estimate

If we believe the original conditions and assumptions are wrong

Will not be tested as there is nothing to calculate

Variance at Completion (VAC) — the variance at completion, i.e. the difference between the new estimate at completion and original
planned value

VAC = BAC – EAC

If we forecast the project will be over budget, VAC will be negative
If we forecast the project will be under budget, VAC will be positive
example: the VAC for the housing project = US$10000 – US$13333 (just take the 1st EAC as an example only) = -US$3333

To Complete Performance Index (TCPI) — the efficiency needed to finish the project on budget, it is the ratio between budgeted cost of work
remaining and money remaining

TCPI = (BAC-EV)/(BAC-AC)
Use this equation if the project is required to finish within BAC

example: the TCPI for the housing project at end of week 4 = (US$10000 – US$3000) / (US$10000 – US$4000) = 1.167

TCPI = (BAC-EV)/(EAC-AC)
Use this equation if the project is required to finish within new EAC

example: the TCPI for the housing project at end of week 4 with new EAC US$13333 = (US$10000 – US$3000) / (US$13333 –
US$4000) = 0.75

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PMP Earned Value Management (EVM) Calculation Explained

Notes on Earned Value Measurement

The following will discuss how earned value is measured for project and work, from simple physical measurements, percentage complete to
weighted milestones. Since the PMP® EVM questions cannot describe a lot of information, the part on earned value measurements will normally be
based on simplified situations like physical measurements or percentage complete.

It is likely that you will not be tested on the more difficult ways of measuring earned values. These are included here for your reference only.

Physical Measurement — directly transform the physical measurement of the amount of work completed into EV
example: building 10 houses each has a value of US$1000 expected to be completed in 10 weeks in proportion, earned value of 3 house
built is US$3000

Percentage Complete — directly transform the percentage of the amount of work completed into EV
example: building 10 houses each has a value of US$1000 expected to be completed in 10 weeks in proportion, earned value of 30%
complete is US$3000

Weighted Milestone — a EV is assigned to the 100% completion of each milestone of the work packages with prior agreement with
stakeholders

Fixed Formula — a specific percentage of the overall PV is assigned to the start of a work package and the remaining assigned
upon completion; these must be agreed upon in the project management plan

0/100 rule: 0% EV at the activity begins; 100% EV upon completion

20/80 rule: 20% EV at the activity begins; 80% EV upon completion.
50/50 rule: 50% EV at the activity begins; 50% EV upon completion

EVM Charts
In common practices, EVM will also involve plotting the values on a graph in order to help stakeholders concerned to visualize the progress and the
health of the project. More often than not you will find the EV, AC and PV plotted on a graph and you will be asked on the interpretation of the
graph.

Insights to be gained from the chart:

If EV line is below PV, the project is behind schedule; if EV is above PV, the project is ahead of schedule.
If AC line is below EV, the project is within budget; if AC is above EV, the project is over budget.

Below is an example of the EVM charts you would be likely to encounter in your PMP® Exam — solid lines represent actual figures while dotted
lines represent forecasted figures:

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PMP Earned Value Management (EVM) Calculation Explained

Judging from the chart above, we can infer that the project is currently over budget and behind schedule.

PMP® Earned Value Management (EVM) Formulas in PMBOK® Guide At a Glance

12 PMP® EVM Formulas

Name (Abbreviation) Formula Interpretation

SPI = EV/PV <1 behind schedule

Schedule Performance Index (SPI) EV = Earned Value =1 on schedule

PV = Planned Value >1 ahead of schedule

< 1    Over budget

= 1    On budget
CPI = EV/AC > 1    Under budget

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PMP Earned Value Management (EVM) Calculation Explained

Cost Performance Index (CPI) EV = Earned Value

AC = Actual Cost sometimes the term ‘cumulative CPI’

would be shown, which actually is the

CPI up to that moment

SV = EV – PV <0 Behind schedule

Schedule Variance (SV) EV = Earned Value =0 On schedule

PV = Planned Value >0 Ahead of schedule

CV = EV – AC <0 Over budget

Cost Variance (CV) EV = Earned Value =0 On budget

AC = Actual Cost >0 Within budget

EAC = AC + New ETC if the original estimate is based on

Estimate at Completion (EAC) if
AC = Actual Cost wrong data/assumptions or
original is flawed
New ETC = New Estimate to Completion circumstances have changed

EAC = AC + BAC – EV
the variance is caused by a one-time
Estimate at Completion (EAC) if BAC AC = Actual Cost
event and is not likely to happen
remains the same BAC = Budget at completion
again
EV = Earned Value

EAC = BAC/CPI if the CPI would remain the same till

Estimate at Completion (EAC) if CPI
BAC = Budget at completion end of project, i.e. the original
remains the same
CPI = Cost performance index estimation is not accurate

EAC = AC + [(BAC -EV)/(CPI*SPI)]

AC = Actual Cost use when the question gives all the
Estimate at Completion (EAC) if BAC = Budget at completion values (AC, BAC, EV, CPI and SPI),
substandard performance continues EV = Earned Value otherwise, this formula is not likely to

CPI = Cost Performance Index be used

SPI = Schedule Performance Index

TCPI = (BAC – EV)/

(BAC – AC)
BAC = Budget at completion

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PMP Earned Value Management (EVM) Calculation Explained

EV = Earned value

AC = Actual Cost < 1    Under budget

To-Complete Performance Index
= 1    On budget
(TCPI) TCPI = Remaining Work > 1    Over budget
/Remaining Funds
BAC = Budget at completion
EV = Earned value

CPI = Cost performance index

ETC = EAC -AC

Estimate to Completion EAC = Estimate at Completion

AC = Actual Cost

VAC = BAC – EAC <0 Over budget

Variance at Completion BAC = Budget at completion =0 On budget

EAC = Estimate at Completion >0 Under budget

1. PMP Earned Value Management (EVM) Calculation Explained in Simple Terms

2. Top Tips for Tackling PMP EVM Questions (20+ Practice Questions Included)

3. An Introduction to PMBOK Guide: Knowledge Areas, Processes and Process Groups

4. PMP Certification Study Notes 1 - Terms and Concepts

5. How to Study for PMI PMP? Learn PMI-ism First!

6. PMP Certification Study Notes 2/3 - Project Management Processes and Knowledge Areas

7. PMP Certification Study Notes 4 - Project Integration Management

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