📊 PMBOK 7 – Earned Value Management (EVM)
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🎯 What is Earned Value Management?
Earned Value Management (EVM) is a project performance measurement technique that integrates scope, schedule, and cost to provide an objective picture of project health. It answers three critical questions:
- 📍 Where should we be? → Planned Value (PV)
- 📍 Where are we? → Earned Value (EV)
- 💰 What did we spend? → Actual Cost (AC)
💡 PMBOK 7 Context
- EVM is a core tool in the Monitoring & Controlling process group
- PMBOK 7 uses a principle-based approach — EVM supports the "Optimize Risk Responses" and "Steward Project Resources" principles
- EVM applies to both predictive (waterfall) and hybrid projects
- EVM data feeds the Work Performance Report — a key project artifact
📐 Core EVM Variables
| Term | Abbrev. | Definition | Also Called |
|---|---|---|---|
| Budget at Completion | BAC | Total approved budget for the project/work | Original Budget |
| Planned Value | PV | Authorized budget assigned to scheduled work at a given point in time | BCWS – Budgeted Cost of Work Scheduled |
| Earned Value | EV | Value of work actually accomplished, expressed in budget terms | BCWP – Budgeted Cost of Work Performed |
| Actual Cost | AC | Actual cost incurred for work performed during a given period | ACWP – Actual Cost of Work Performed |
🧠 Memory Trick for PV, EV, AC
- PV = What you PLANNED to spend by now (based on schedule)
- EV = What the WORK DONE is worth (% complete × BAC)
- AC = What you ACTUALLY SPENT so far
🔢 How to Calculate EV
EV is always calculated as:
EV = % Complete × BAC
📌 Example: Calculating EV
A project has a BAC of $500,000. By the midpoint, the team has completed 40% of the work but spent $230,000.
- PV = $250,000 (50% of BAC — what was planned to be done by midpoint)
- EV = 40% × $500,000 = $200,000
- AC = $230,000 (given — what was actually spent)
🔢 Complete EVM Formula Reference
📉 Variance Formulas
| Formula | Equation | Positive = | Negative = |
|---|---|---|---|
| Cost Variance (CV) | CV = EV − AC | Under Budget ✅ | Over Budget ❌ |
| Schedule Variance (SV) | SV = EV − PV | Ahead of Schedule ✅ | Behind Schedule ❌ |
🧠 Memory: CV and SV are always EV MINUS something
- CV = EV − AC → "EV minus Actual"
- SV = EV − PV → "EV minus Planned"
- Positive variance = GOOD. Negative variance = BAD.
📊 Performance Index Formulas
| Formula | Equation | > 1 = | < 1 = | = 1 = |
|---|---|---|---|---|
| Cost Performance Index (CPI) | CPI = EV ÷ AC | Under Budget | Over Budget | On Budget |
| Schedule Performance Index (SPI) | SPI = EV ÷ PV | Ahead of Schedule | Behind Schedule | On Schedule |
🧠 Memory: Both indices = EV on top (numerator)
- CPI = EV / AC → Think: "What am I getting for each dollar spent?"
- SPI = EV / PV → Think: "How much work done vs planned?"
- CPI = 0.8 means: for every $1 spent, only $0.80 of value is received
🔮 Forecasting Formulas
| Formula | Equation | When to Use |
|---|---|---|
| EAC (Typical Variance) | EAC = BAC ÷ CPI | Current CPI will continue for remaining work |
| EAC (Atypical Variance) | EAC = AC + (BAC − EV) | Remaining work will be done at original budget rate |
| EAC (New Estimate) | EAC = AC + ETC | Original estimate is fundamentally flawed; new estimate created |
| EAC (CPI × SPI) | EAC = AC + [(BAC−EV) ÷ (CPI×SPI)] | Both cost and schedule inefficiencies will impact remaining work |
| Estimate to Complete (ETC) | ETC = EAC − AC | Remaining budget needed from this point forward |
| TCPI (vs BAC) | TCPI = (BAC − EV) ÷ (BAC − AC) | Efficiency needed to finish within original budget |
| TCPI (vs EAC) | TCPI = (BAC − EV) ÷ (EAC − AC) | Efficiency needed to finish within revised EAC |
💰 Variance at Completion & BAC
| Formula | Equation | Meaning |
|---|---|---|
| Variance at Completion (VAC) | VAC = BAC − EAC | Expected over/under run at project end. Positive = surplus |
| Percent Complete | % = EV ÷ BAC × 100 | How much of the total work is done |
⚠️ Common EAC Confusion on the Exam
- The exam gives you clues about which EAC formula to use
- "Variances are typical/expected to continue" → Use EAC = BAC/CPI
- "Variances are atypical/one-time" → Use EAC = AC + (BAC−EV)
- "Management provided new estimate" → Use EAC = AC + ETC (bottom-up)
📘 Fully Worked Examples
📌 Example 1 – Project Looks On Track
Given: BAC = $800,000 | Project is 50% complete | AC = $390,000 | PV = $400,000
| Step | Calculation | Result | Interpretation |
|---|---|---|---|
| EV | 50% × $800,000 | $400,000 | Value of work done |
| CV | $400,000 − $390,000 | +$10,000 | $10K under budget ✅ |
| SV | $400,000 − $400,000 | $0 | Exactly on schedule |
| CPI | $400,000 ÷ $390,000 | 1.026 | Getting $1.03 per $1 spent ✅ |
| SPI | $400,000 ÷ $400,000 | 1.00 | Perfectly on schedule |
| EAC | $800,000 ÷ 1.026 | $779,728 | Expected final cost |
| ETC | $779,728 − $390,000 | $389,728 | Remaining budget needed |
| VAC | $800,000 − $779,728 | +$20,272 | Will finish ~$20K under budget |
📌 Example 2 – Over Budget, Behind Schedule
Given: BAC = $1,000,000 | 45% complete | AC = $550,000 | PV = $500,000
| Step | Calculation | Result | Interpretation |
|---|---|---|---|
| EV | 45% × $1,000,000 | $450,000 | Value earned |
| CV | $450,000 − $550,000 | −$100,000 | $100K OVER budget ❌ |
| SV | $450,000 − $500,000 | −$50,000 | Behind schedule ❌ |
| CPI | $450,000 ÷ $550,000 | 0.818 | Only $0.82 earned per $1 spent |
| SPI | $450,000 ÷ $500,000 | 0.90 | 90% efficiency on schedule |
| EAC | $1,000,000 ÷ 0.818 | $1,222,494 | Will cost $222K MORE than budgeted! |
| TCPI | ($1M−$450K)÷($1M−$550K) | 1.222 | Must work 22% MORE efficiently — very hard to achieve |
| VAC | $1,000,000 − $1,222,494 | −$222,494 | Expected overrun of $222K |
📌 Example 3 – Under Budget, Ahead of Schedule
Given: BAC = $600,000 | 60% complete | AC = $300,000 | PV = $330,000
| Step | Calculation | Result | Interpretation |
|---|---|---|---|
| EV | 60% × $600,000 | $360,000 | Value earned |
| CV | $360,000 − $300,000 | +$60,000 | Under budget ✅ |
| SV | $360,000 − $330,000 | +$30,000 | Ahead of schedule ✅ |
| CPI | $360,000 ÷ $300,000 | 1.20 | Getting $1.20 per dollar spent ✅ |
| SPI | $360,000 ÷ $330,000 | 1.09 | Working 9% faster than planned ✅ |
| EAC | $600,000 ÷ 1.20 | $500,000 | Will finish $100K under budget! |
| VAC | $600,000 − $500,000 | +$100,000 | Expected surplus of $100K |
📌 Example 4 – Forecasting with TCPI and EAC Options
Given: BAC = $750,000 | EV = $300,000 | AC = $360,000 | CPI = 0.833
| EAC Method | Formula | Result | Use When |
|---|---|---|---|
| Typical variances | $750,000 ÷ 0.833 | $900,360 | CPI trend will continue |
| Atypical variances | $360K + ($750K−$300K) | $810,000 | Cost issues were one-time |
| TCPI vs BAC | ($750K−$300K) ÷ ($750K−$360K) | 1.154 | Need 15% better efficiency (very hard) |
| TCPI vs EAC | ($750K−$300K) ÷ ($900K−$360K) | 0.833 | Just maintain current rate |
🔑 Key Insight: When TCPI (vs BAC) > CPI, the project is in trouble — the team must perform BETTER than they have been to recover.
🎭 PMP Exam Scenarios
Scenario 1 Classic
A project has a BAC of $200,000. After 3 months, the project is 30% complete and has spent $75,000. The schedule baseline shows 40% should be done. Is the project in good shape?
EV = 30% × $200K = $60,000
PV = 40% × $200K = $80,000
AC = $75,000
CV = $60K − $75K = −$15,000 (OVER budget)
SV = $60K − $80K = −$20,000 (BEHIND schedule)
Conclusion: The project is both over budget AND behind schedule. Corrective action is needed.
PV = 40% × $200K = $80,000
AC = $75,000
CV = $60K − $75K = −$15,000 (OVER budget)
SV = $60K − $80K = −$20,000 (BEHIND schedule)
Conclusion: The project is both over budget AND behind schedule. Corrective action is needed.
Scenario 2 TCPI Decision
CPI = 0.75. Management sets a new EAC = $500,000 (BAC=$400,000, AC=$250,000, EV=$187,500). Can the team achieve this EAC?
TCPI vs EAC = ($400K − $187.5K) ÷ ($500K − $250K) = $212,500 ÷ $250,000 = 0.85
TCPI vs BAC = ($400K − $187.5K) ÷ ($400K − $250K) = $212,500 ÷ $150,000 = 1.42
Conclusion: TCPI of 0.85 is LESS than current CPI of 0.75? Wait — 0.85 > 0.75, so the team must work more efficiently than they currently are, but the new EAC ($500K) is more achievable than the original BAC.
TCPI vs BAC = ($400K − $187.5K) ÷ ($400K − $250K) = $212,500 ÷ $150,000 = 1.42
Conclusion: TCPI of 0.85 is LESS than current CPI of 0.75? Wait — 0.85 > 0.75, so the team must work more efficiently than they currently are, but the new EAC ($500K) is more achievable than the original BAC.
Scenario 3 Which EAC?
A project manager reports that delays in early phases were caused by a hurricane — a unique event that won't repeat. Which EAC formula should be used?
Answer: EAC = AC + (BAC − EV)
Because the variance was atypical (one-time hurricane), future work is expected to proceed at the original budgeted rate. Do NOT use BAC/CPI which assumes inefficiency continues.
Because the variance was atypical (one-time hurricane), future work is expected to proceed at the original budgeted rate. Do NOT use BAC/CPI which assumes inefficiency continues.
Scenario 4 SPI vs Reality
A project has SPI = 1.15. The customer calls complaining the project is late. How can both be true?
SPI measures cost efficiency of work completed, not necessarily calendar time.
SPI = 1.15 means more work is done per dollar of planned schedule budget.
However, if critical path activities are delayed, the project can still be behind.
Lesson: EVM (SPI) must be used alongside the schedule network — SPI alone doesn't capture critical path delays. This is a known limitation of traditional EVM.
SPI = 1.15 means more work is done per dollar of planned schedule budget.
However, if critical path activities are delayed, the project can still be behind.
Lesson: EVM (SPI) must be used alongside the schedule network — SPI alone doesn't capture critical path delays. This is a known limitation of traditional EVM.
Scenario 5 Earned Schedule
As a project nears completion, SPI approaches 1.0 regardless of delays. Why?
SPI = EV / PV. Near project end, EV approaches BAC and PV also equals BAC, so SPI → 1.0 even if the project is months late.
This is why Earned Schedule (ES) was developed as a supplement — it measures schedule performance in time units rather than dollars, correcting this mathematical artifact.
This is why Earned Schedule (ES) was developed as a supplement — it measures schedule performance in time units rather than dollars, correcting this mathematical artifact.
Scenario 6 Hard Calculation
BAC=$300K, CPI=0.90, SPI=0.85, AC=$150K, EV=$135K. What is EAC using CPI×SPI method?
EAC = AC + [(BAC−EV) ÷ (CPI × SPI)]
= $150K + [($300K − $135K) ÷ (0.90 × 0.85)]
= $150K + [$165K ÷ 0.765]
= $150K + $215,686
= $365,686
This project will overrun by $65,686 if current trends continue.
= $150K + [($300K − $135K) ÷ (0.90 × 0.85)]
= $150K + [$165K ÷ 0.765]
= $150K + $215,686
= $365,686
This project will overrun by $65,686 if current trends continue.
Scenario 7 ETC Calculation
EAC=$480,000, AC=$210,000. What is ETC? What does it mean?
ETC = EAC − AC = $480,000 − $210,000 = $270,000
ETC is the remaining budget estimate — how much more money is needed from this point forward to complete the project. This is what the PM needs to request or plan for.
ETC is the remaining budget estimate — how much more money is needed from this point forward to complete the project. This is what the PM needs to request or plan for.
💡 PMP Exam Tips – EVM
✅ Top 10 EVM Exam Strategies
- Always calculate EV first — it's the foundation of every other formula
- EV = % Complete × BAC (never forget this relationship)
- Positive values = GOOD; Negative values = BAD (for CV and SV)
- Index > 1 = GOOD; Index < 1 = BAD (for CPI and SPI)
- TCPI > 1 means you need to work MORE efficiently than current — hard to achieve
- When TCPI (vs BAC) > CPI, achieving the original budget is likely impossible
- EAC = BAC/CPI is the most commonly tested forecasting formula
- Read scenario clues carefully: "typical" vs "atypical" variances → different EAC formula
- VAC = BAC − EAC (positive = surplus, negative = overrun)
- ETC = How much MORE do we need? EAC = How much TOTAL will it cost?
⚠️ Common Mistakes to Avoid
- Confusing ETC (remaining cost) with EAC (total final cost)
- Using AC in place of EV — AC is what you spent, EV is what you earned
- Forgetting that PV = planned budget at a point in time (not just % × BAC always)
- Mixing up the EAC formulas — pay attention to which scenario is described
- Assuming SPI > 1 always means the project is truly on time (see Scenario 4)
- Forgetting VAC = BAC − EAC (not EV − AC, which is CV)
📐 Formula Derivation Shortcuts
| If Exam Gives | What to Calculate First |
|---|---|
| % complete + BAC + AC | EV = % × BAC, then CPI = EV/AC, CV = EV−AC |
| EV, AC, PV only | CV, SV, CPI, SPI directly |
| "How much more will it cost?" | ETC = EAC − AC |
| "What is the expected final cost?" | EAC (choose right formula based on context) |
| "Is budget recovery possible?" | Compare TCPI vs BAC with current CPI |
| "What efficiency is needed?" | TCPI = (BAC−EV)/(BAC−AC) |
🔑 EVM Keywords & Trigger Phrases
| Keyword / Phrase | What It Maps To | Action |
|---|---|---|
| Over budget | CV is Negative, CPI < 1 | Check EAC, consider corrective action |
| Under budget | CV is Positive, CPI > 1 | Project performing well cost-wise |
| Behind schedule | SV is Negative, SPI < 1 | Check schedule, crash or fast-track? |
| Ahead of schedule | SV is Positive, SPI > 1 | Good performance, sustain it |
| Typical / Expected variances | EAC = BAC ÷ CPI | Use CPI-based EAC formula |
| Atypical / One-time variances | EAC = AC + (BAC − EV) | Use BAC−EV atypical formula |
| New bottom-up estimate | EAC = AC + ETC | Original estimate is flawed |
| How much more money? | ETC = EAC − AC | Remaining budget estimate |
| Expected final cost | EAC | Calculate using appropriate formula |
| Will we finish on budget? | VAC = BAC − EAC | Positive = under, Negative = over |
| Efficiency needed | TCPI | Compare to current CPI to assess feasibility |
| What was the original budget? | BAC | Budget at Completion |
| What was planned by now? | PV (Planned Value) | Also called BCWS |
| Value of work done | EV (Earned Value) | Also called BCWP |
| What did we spend? | AC (Actual Cost) | Also called ACWP |
| Performance to date | CPI and SPI | Efficiency indices |
🗂 EVM Cheat Sheet – Quick Reference
Earned Value
EV = % × BAC
Value of work done
Cost Variance
CV = EV − AC
+ = under, − = over
Schedule Variance
SV = EV − PV
+ = ahead, − = behind
Cost Perf. Index
CPI = EV / AC
>1 good, <1 bad
Schedule Perf. Index
SPI = EV / PV
>1 good, <1 bad
EAC (Typical)
BAC ÷ CPI
CPI continues
EAC (Atypical)
AC + (BAC−EV)
One-time variance
EAC (New Est.)
AC + ETC
Fresh estimate
Estimate to Complete
ETC = EAC − AC
Remaining $ needed
TCPI (vs BAC)
(BAC−EV)/(BAC−AC)
Efficiency to meet BAC
TCPI (vs EAC)
(BAC−EV)/(EAC−AC)
Efficiency to meet EAC
Variance at Completion
VAC = BAC − EAC
+ = surplus, − = overrun
📊 EVM Interpretation Guide
| CV | SV | Situation | Recommended Action |
|---|---|---|---|
| Positive | Positive | Under Budget & Ahead of Schedule ✅ | Keep going! Sustain performance. Report to stakeholders. |
| Positive | Negative | Under Budget but Behind Schedule | Reallocate budget to recover schedule. Consider fast-tracking. |
| Negative | Positive | Over Budget but Ahead of Schedule | Investigate overspending. Ensure quality. Slow down if needed. |
| Negative | Negative | Over Budget & Behind Schedule ❌ | URGENT: Root cause analysis. Escalate. Crash/rebaseline? |
CPI & SPI Ranges
| CPI Range | Meaning | TCPI Implication |
|---|---|---|
| > 1.10 | Significantly under budget | TCPI will be well below 1.0 — easy to sustain |
| 1.00 – 1.10 | Slightly to moderately under budget | TCPI slightly below 1.0 — achievable |
| = 1.00 | Exactly on budget | TCPI = 1.00 — maintain current rate |
| 0.90 – 0.99 | Slightly over budget | TCPI slightly above 1.0 — difficult but possible |
| < 0.90 | Significantly over budget | TCPI much > 1.0 — recovery unlikely without major changes |
🧮 Interactive EVM Calculator
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| Topic | Mastered? | Notes |
|---|---|---|
| Core Variables (PV, EV, AC, BAC) | Foundation of EVM | |
| All EVM Formulas | 12 core formulas | |
| Worked Examples | 4 full examples | |
| PMP Scenarios (7) | Critical for exam | |
| Exam Tips | Top 10 strategies | |
| Keywords Table | Trigger phrases | |
| Cheat Sheet Memorized | 12 cards | |
| Calculator Practice | Run 5+ scenarios |