148- Earned Value Management (EVM) Formulas

Budget at Completion (BAC)

• Definition: The original, total approved budget for the project.
• Calculation: No specific formula; often a straightforward calculation based on project scope (e.g., \text{BAC} = \text{cost per unit} \times \text{number of units} ).
• Example: A building project with 20 stories at $1 million per story has a BAC of $20 million (20,000,000).

Planned Value (PV)

• Definition: The budgeted cost of work that should have been completed by a specific point in time.
• Represents: How much money worth of work should have been done.
• Calculation: PV = \text{Planned Percent Complete} \times \text{BAC}
• Example: If PV is $100, $100 worth of work should have been done.
• Finding Planned Percent Complete: If a project is planned for ten days and five days have passed, the planned percent complete is 50% (\frac{5}{10} = 0.5 = 50\%%).

Earned Value (EV)

*Definition: The amount of money worth of work actually completed.

• Importance: Critical for Earned Value Management; an incorrect EV calculation will propagate errors through many other formulas.
• Calculation: EV = \text{Actual Percent Complete} \times \text{BAC}
• Example: An earned value of $60 means $60 worth of work has actually been done.
• Difference from PV: PV is what should have been done, while EV is what actually was done. If PV is $40 and EV is $60, you've done $20 more worth of work than planned, which is a good thing.

Actual Cost (AC)

• Definition: The actual amount of money spent on the project to date.
• Calculation: No specific formula; it's the sum of all costs incurred.

Cost Variance (CV)

• Definition: The difference between the earned value and the actual cost. It indicates whether the project is under or over budget.
• Calculation: CV = EV - AC
• Interpretation:
  • Positive CV: Under budget (good).
  • Negative CV: Over budget (bad).

Cost Performance Index (CPI)

• Definition: A measure of the cost efficiency of the project.
• Calculation: CPI = \frac{EV}{AC}
• Interpretation:
  • CPI > 1: Under budget (good).
  • CPI = 1: On budget.
  • CPI < 1: Over budget (bad).

Schedule Variance (SV)

*Definition: Schedule Variance is the difference between the amount of work we should have done versus the amount of work actually done

• Calculation: SV = EV - PV *Interpretation
  • Positive: good, ahead of schedule
  • Zero: on schedule
  • Negative: behind schedule

Schedule Performance Index (SPI)

*Definition: The rate of how we are meeting the project schedule.

• Calculation: SPI = \frac{EV}{PV}
• Interpretation:
  • SPI > 1: Ahead of schedule.
  • SPI = 1: On schedule.
  • SPI < 1: Behind schedule.
• Example: Somebody comes to you at 1.2, you're 20% ahead of schedule. So it comes to point eight, you are 20% behind schedule.

Estimate at Completion (EAC)

• Definition: A forecast of the total cost of the project upon completion, based on current spending.
• Purpose: To predict total project cost.
• Calculation: EAC = \frac{BAC}{CPI}
• Interpretation:
  • EAC < BAC: Project is expected to finish under budget.
  • EAC > BAC: Project is expected to finish over budget.
• Example:
  • BAC = $1,000 and EAC = $1,100: Project is forecast to be $100 over budget.

Estimate to Complete (ETC)

• Definition: A forecast of how much more money is needed to complete the project.
• Calculation: ETC = EAC - AC
• Example: If EAC is $1,000 and AC is $900, the ETC is $100 (another $100 is needed).

Variance at Completion (VAC)

• Definition: The difference between the original budget and the new forecasted budget.
• Calculation: VAC = BAC - EAC
• Interpretation:
  *Positive VAC: Project may end at or under budget
  *Negative VAC: The amount of over budget you'll be at

To-Complete Performance Index (TCPI)

• Definition: The performance level needed to finish the project within the budget.
• Calculation: TCPI = \frac{BAC - EV}{BAC - AC}
• Interpretation:
  • TCPI < 1: Easier to complete within budget; project can perform at a lower efficiency.
  • TCPI = 1: Current performance must be maintained to finish on budget.
  • TCPI > 1: Harder to complete within budget; project must improve performance.
• Example:
  • TCPI = 0.8: Only need to work 80% as hard to finish on budget.
  • TCPI = 1.2: Need to work 20% harder to finish on budget.