Earned Value Management (EVM) is a comprehensive project management technique that integrates scope, schedule, and cost parameters to assess project performance and progress objectively. It provides a quantitative method for measuring project health by comparing planned work against completed work …Earned Value Management (EVM) is a comprehensive project management technique that integrates scope, schedule, and cost parameters to assess project performance and progress objectively. It provides a quantitative method for measuring project health by comparing planned work against completed work and planned costs against actual expenditures. The core components of EVM include Planned Value (PV), Earned Value (EV), and Actual Cost (AC). Planned Value represents the approved budget for the work scheduled to be completed by a specified date. Earned Value is the approved budget for the work actually completed by that date. Actual Cost is the total cost incurred for the work performed.
By analyzing these elements, project managers can calculate variances and performance indices such as Schedule Variance (SV), Cost Variance (CV), Schedule Performance Index (SPI), and Cost Performance Index (CPI). These metrics indicate whether the project is ahead or behind schedule and under or over budget. EVM is essential for progress measurement and reporting because it provides early warning signs of performance issues, allowing for timely corrective actions. It enables project managers to forecast future performance trends, make informed decisions, and communicate project status effectively to stakeholders.
EVM fosters transparency and accountability, contributing to better project control and governance. It is widely recognized by professional organizations like the Project Management Institute (PMI) and is considered a best practice in project management. Implementing EVM helps ensure that projects are delivered on time, within scope, and on budget, ultimately leading to successful project outcomes.
Earned Value Management (EVM): Guide, Formula, and Exam Tips
Introduction to Earned Value Management (EVM)
Earned Value Management (EVM) is a project management technique that measures project performance by comparing the amount of work planned with what has been actually accomplished to determine cost and schedule variances.
Why EVM is Important
EVM provides an objective way to measure project progress and forecast future performance. It helps project managers:
- Detect schedule and cost variances early - Make data-driven decisions - Forecast final costs and completion dates - Communicate project status to stakeholders using consistent metrics - Enhance accountability and transparency
Key EVM Components
Planned Value (PV): The authorized budget assigned to scheduled work. It represents how much work should be completed at a specific point in time.
Earned Value (EV): The value of work actually completed, expressed in terms of the authorized budget. It represents the physical work accomplished.
Actual Cost (AC): The total cost incurred to achieve the actual work performed.
Primary EVM Calculations
Schedule Variance (SV): SV = EV - PV - Positive: Ahead of schedule - Negative: Behind schedule - Zero: On schedule
Cost Variance (CV): CV = EV - AC - Positive: Under budget - Negative: Over budget - Zero: On budget
Schedule Performance Index (SPI): SPI = EV/PV - Greater than 1: Ahead of schedule - Less than 1: Behind schedule - Equal to 1: On schedule
Cost Performance Index (CPI): CPI = EV/AC - Greater than 1: Under budget - Less than 1: Over budget - Equal to 1: On budget
Estimate at Completion (EAC): Projection of total cost at project completion - EAC = BAC/CPI (assuming current performance continues) - EAC = AC + (BAC-EV) (assuming remaining work will be done according to plan)
Estimate to Complete (ETC): ETC = EAC - AC
Variance at Completion (VAC): VAC = BAC - EAC
To Complete Performance Index (TCPI): TCPI = (BAC-EV)/(BAC-AC)
Where BAC = Budget at Completion (total project budget)
How EVM Works in Practice
1. Establish the baseline: Create a time-phased budget baseline (Performance Measurement Baseline) 2. Measure progress: Determine the earned value of completed work 3. Collect actual costs: Track expenditures for completed work 4. Calculate variances: Determine schedule and cost variances 5. Analyze performance: Calculate performance indices (SPI and CPI) 6. Forecast outcomes: Estimate final costs and completion dates 7. Take corrective action: Implement changes to bring the project back on track
Exam Tips: Answering Questions on EVM
1. Memorize all formulas: Know each formula and what it represents
2. Understand the terminology: Be clear on what PV, EV, AC, BAC, SV, CV, SPI, CPI, EAC, ETC, VAC, and TCPI mean
3. Practice calculations: Be comfortable performing calculations quickly and accurately
4. Interpret the results: Know what positive/negative variances and indices above/below 1.0 indicate
5. Know multiple EAC formulas: Understand which EAC formula to use based on different assumptions
6. Understand the S-curve: Recognize how EVM data is represented graphically
7. Connect to project phases: Understand how EVM relates to initiating, planning, executing, monitoring and controlling
8. Remember practical applications: Consider how EVM helps in real-world decision making
9. Watch for trick questions: Pay attention to whether a question is asking about schedule or cost
10. Read carefully: Note whether questions are asking for variance, index, or forecasted values
Common Exam Pitfalls to Avoid
- Confusing SV and CV calculations - Mixing up SPI and CPI interpretations - Using the wrong EAC formula for a given scenario - Forgetting to consider the cumulative nature of EVM metrics - Misinterpreting positive and negative variances
Example Question:
A project has a BAC of $100,000. The project manager reports PV=$50,000, EV=$40,000, and AC=$60,000. What is the CPI, and what does it indicate about the project?
Solution: CPI = EV/AC = $40,000/$60,000 = 0.67 This indicates the project is over budget, as it is delivering only 67 cents of value for every dollar spent.
PMI-SP - Earned Value Management (EVM) Example Questions
Test your knowledge of Earned Value Management (EVM)
Question 1
In Earned Value Management (EVM), if a project's Cost Performance Index (CPI) is 1.25 and Schedule Performance Index (SPI) is 0.85, what best describes the project's status?
Question 2
In a project where the BAC (Budget at Completion) is $500,000, PV (Planned Value) is $200,000, AC (Actual Cost) is $180,000, and EV (Earned Value) is $160,000, what is the Schedule Performance Index (SPI)?
Question 3
When performing Earned Value Management (EVM), which of the following estimates represents the most optimistic forecast of the project's final cost?
🎓 Unlock Premium Access
PMI Scheduling Professional + ALL Certifications
🎓 Access to ALL Certifications: Study for any certification on our platform with one subscription
3428 Superior-grade PMI Scheduling Professional practice questions
Unlimited practice tests across all certifications
Detailed explanations for every question
PMI-SP: 5 full exams plus all other certification exams
100% Satisfaction Guaranteed: Full refund if unsatisfied
Risk-Free: 7-day free trial with all premium features!