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Earned value management

Intermediate Cost Management Reviewed 23 Oct 2026 2 min read

Earned value management tells a project manager, with three numbers, whether work is ahead or behind and over or under budget.

Planned value (PV) is the budgeted cost of the work scheduled up to the status date. Earned value (EV) is the budgeted cost of the work actually done. Actual cost (AC) is what that work really cost. Comparing EV with PV gives schedule performance; comparing EV with AC gives cost performance. The budget at completion (BAC) is the total budget.

Diagram: Indiacon original, not to scale.

Indices make projects comparable. A cost performance index (CPI) below 1 means each rupee spent is buying less than a rupee of planned work. A schedule performance index (SPI) below 1 means progress is behind plan. If current cost efficiency continues, the estimate at completion is the budget divided by CPI.

EVM needs a good baseline: a work breakdown structure with budgets assigned to activities, and an honest way of measuring progress. Our EVM calculator does the arithmetic.

Tip

Read CPI and SPI together: a project can be on budget and still late.

Key formulas
  • CV = EV − AC; SV = EV − PV
  • CPI = EV / AC; SPI = EV / PV
  • EAC = BAC / CPI (if current cost efficiency continues)
  • ETC = EAC − AC; VAC = BAC − EAC
Common mistake

Comparing actual cost with planned value instead of earned value.

Solved example

Problem. BAC = Rs 100 lakh. At month 6: PV = 40, EV = 35, AC = 42 (Rs lakh). Find CPI, SPI and EAC.

  1. CPI = 35 / 42 = 0.833.
  2. SPI = 35 / 40 = 0.875.
  3. EAC = 100 / 0.833 = Rs 120 lakh.
  4. VAC = 100 − 120 = −Rs 20 lakh.

Answer. CPI 0.83, SPI 0.88, EAC Rs 120 lakh

Quick quiz

1What does CPI < 1 mean?

Over budget for the work done.

2Formula for SV?

EV − PV.

3EAC if CPI stays constant?

BAC / CPI.

Code note
  • PMI PMBOK Guide / ANSI standard for project management (USA): Framework of project management principles and practices.
  • AACE International Recommended Practices (USA): Cost engineering practices, including estimate classification.

Cited by number and clause only. We do not reproduce clause text, tables or figures (BIS Act 2016, s.10(5) and s.11). Check the current edition and amendments before use.

References and further reading

Standard texts, listed in no order of merit. We do not copy text, figures, tables or solved problems from any book; our explanations and examples are original.

  • Q. W. Fleming, J. M. Koppelman, Earned Value Project Management, Project Management Institute, latest edition.
  • K. K. Chitkara, Construction Project Management, McGraw Hill Education (India), latest edition.

Free and official sources

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