PROJECT MANAGEMENT:budgeting

PV — Planned Value

Formula: PV = BAC × planned % complete. The portion of the total budget that should have been spent by now, based on the original schedule — a measure of what work SHOULD have been done.

EV — Earned Value

Formula: EV = BAC × actual % complete. The portion of the total budget associated with the work genuinely completed so far — a measure of what work HAS actually been done.

AC — Actual Cost

The real amount of money that has actually been spent on the project up to this point in time.

BAC — Budget at Completion

The total approved budget for the entire project, agreed before work begins.

SV — Schedule Variance

Formula: SV = EV − PV. The gap, in money, between work completed and work planned. Positive = ahead of schedule. Negative = behind schedule.

CV — Cost Variance

Formula: CV = EV − AC. The gap, in money, between the value of work completed and the money spent on it. Positive = under budget. Negative = over budget.

SPI — Schedule Performance Index

Formula: SPI = EV ÷ PV. A ratio showing how much work is being completed relative to what was planned. Above 1 = ahead of schedule. Below 1 = behind schedule.

CPI — Cost Performance Index

Formula: CPI = EV ÷ AC. A ratio showing how efficiently money is being converted into completed work. Above 1 = cost-efficient. Below 1 = cost-inefficient.

CSI — Cost Schedule Index

Formula: CSI = SPI × CPI. A single combined score for overall time-and-cost performance. Limitation: because it multiplies two ratios, strong performance in one can mask poor performance in the other, so it should not replace checking SPI and CPI individually.

EAC (Method 1 — based on progress to date)

Formula: EAC = BAC ÷ CPI. Forecasts total project cost assuming the team continues working at its CURRENT cost-efficiency for the rest of the project.

EAC (Method 2 — based on original estimation)

Formula: EAC = AC + (BAC − EV). Forecasts total project cost assuming the REMAINING work will go exactly to the original plan, regardless of past performance.

EAC (Method 3 — based on remaining work and performance)

Formula: EAC = AC + (BAC − EV) ÷ CSI. Forecasts total project cost assuming the remaining work is affected by BOTH current cost and schedule efficiency combined.

ETC — Estimate to Complete

Formula: ETC = EAC − AC. The additional money still expected to be needed to finish the remaining work, based on a chosen EAC.

VAC — Variance at Completion

Formula: VAC = BAC − EAC. The expected gap between the original total budget and the forecast final cost. Positive = expected underspend. Negative = expected overspend.

TCPI-BAC — To-Complete Performance Index (vs original budget)

Formula: TCPI-BAC = (BAC − EV) ÷ (BAC − AC). The cost-efficiency the team must achieve on remaining work to finish within the ORIGINAL approved budget.

TCPI-EAC — To-Complete Performance Index (vs revised forecast)

Formula: TCPI-EAC = (BAC − EV) ÷ (EAC − AC). The cost-efficiency the team must achieve on remaining work to hit a REVISED forecast (EAC). Note: if EAC was calculated using BAC ÷ CPI, this value will always come out equal to the current CPI — it just confirms the assumption already baked into that EAC.

PMB — Performance Measurement Baseline (cost baseline)

The approved, time-phased spread of the total budget over the life of the project — the "plan" curve that PV is drawn from at any point in time. BAC is the value of this baseline at project completion.

Contingency Reserve

Extra budget set aside for risks that have already been IDENTIFIED and estimated. Sits inside the cost baseline (PMB) and is controlled by the Project Manager.

Management Reserve

Extra budget set aside for risks that have NOT been identified in advance (unknown-unknowns). Sits outside the cost baseline, set as a fixed percentage based on organisational risk appetite, and is not controlled by the Project Manager.

KPI — Key Performance Indicator

A measurable indicator used to track progress toward a specific project objective. A good KPI is directly and precisely linked to that objective (e.g. "average waiting time" rather than the vague "customer happiness" for a delay-reduction objective).

Triple Bottom Line

A way of judging project success across three dimensions — People, Planet and Profit — rather than financial performance alone. A project can be financially successful yet still perform poorly here (e.g. harming staff wellbeing or the environment).

Data-Driven Management — Pros

Makes performance visible; supports evidence-based decisions; helps identify trends early; can justify corrective action; helps communicate project status clearly to stakeholders.

Data-Driven Management — Cons

Metrics can be misleading; poor-quality data creates false confidence; teams may "game" the metrics being tracked; numbers can hide real quality or user value; measures like % complete can be subjective.

Limitation of EVA

EVA depends on reliable measurement of % complete. If easier tasks are finished first, EV can exaggerate real progress — so the technique is only as trustworthy as the underlying progress data feeding it.

Why use an index (SPI/CPI) instead of just a variance (SV/CV)?

Variances (SV, CV) give an absolute £ gap, which means different things depending on project size. Indices (SPI, CPI) give a proportional rate, letting you judge severity fairly and compare across differently-sized projects — and it's the index form (CPI) that feeds directly into forecasting formulae like EAC.