7 Earned Value Management Formulas to Know For Project Controls
Earned Value (EV)
Earned Value is a term that refers to the cost of the work that has been
completed expressed as the value of the performance budget assigned to that
work. It’s not just the cost of the completing some work, it representing the value
that has been earned by completing the work. This is commonly also referred to
in the construction industry as the “budgeted cost of work performed,” or BCWP.
Earned Value is calculated as the Budget at Completion multiplied by the Percent
of Work Completed.
EV = BAC x % Complete
Planned Value (PV): This term refers to the approved budget for work that is
scheduled to be completed by a certain date in the future. Whereas Earned
Value takes a look at how much you spent to get work done by a certain time,
Planned Value is proactive in that it looks at how much you SHOULD HAVE
spent at to get to a specified date. Planned Value is also referred to as Budgeted
Cost of Work Scheduled or BCWS.
To find the Planned Value at any point in the project, simply add up all your
planned costs up to that point. Often, your planned costs are referenced from the
project’s baseline.
Actual Cost (AC): As its name suggests, Actual Cost is a term used to describe the
amount of money that you actually spent to get a certain task done by a certain
time. Many construction professionals also call this the “Actual Cost of Work
Performed,” or ACWP or just AC.
Like Planned Value, Actual Cost is a cumulative value that continues to grow as
the project progresses.
Budget at Completion: Budget at Completion, also called BAC, is the total amount
of money that you’re expecting to spend to finish a particular task or for the entire
project. You arrive at this number by taking all of the estimates that you’ve
already conducted and assumptions that you’ve made about things like schedule
and work required and adding them together.
Schedule Variance (SV): Schedule Variance is a number that tracks how long
you thought a task would take during planning versus how long it actually took
and how that relates to the money you’re spending. To find this number, begin
with the Earned Value of your task and subtract from it the Planned Value. The
number you’re left with is the amount of money that delays have cost you and
your team so far.
SV = EV – PV
Cost Variance (CV) :Cost Variance allows you to see the discrepancy between the
amount of value that you earned on a task and the actual cost that ask required
to perform. To arrive at this number, take the Earned Value and subtract it from
the Actual Cost.
CV = EV – AC
Schedule Performance Index (SPI)
Schedule Performance Index allows you to take a closer look at overall schedule
efficiency on a project. It answers the question “am I using my time wisely?” SPI
provides an instantaneous check on schedule at any point in the project. To
calculate SPI, take the Earned Value of your task or project and divide it by the
Planned Value.
SPI = EV / PV
Cost Performance Index (CPI)
Cost Performance Index lets you look at not just how much money you’re
spending to complete a project, but how well that money is being utilized. CPI
provides an instantaneous check on cost performance at any point in the project.
To find this number, take the Earned Value of your task or project and divide it by
the Actual Cost.
CPI = EV / AC
Estimate at Completion (EAC)
Estimate at Completion is a handy number to know because it allows you to
estimate the total cost of a task as of today, taking into account the work that
you’ve already done. Take the approved budget that you have for the entire task
and subtract from it the cost variance for all of the work that you’ve done to date.
The number you’re left with is your EAC.
EAC = BAC / CPI
Estimate to Complete (ETC)
The Estimate to Complete is the number that describes exactly what it will take to
finish a particular task, accounting for all of the work that you’ve done up to this
point. To find this number, take the Estimate at Completion and subtract from it
the Actual Costs to Date.
ETC = EAC – AC
