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Key Components of EVM

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11 views3 pages

Key Components of EVM

Uploaded by

Dineshkumar
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Key Components of Earned Value Management (EVM)

1. Planned Value (PV)

Definition: PV is the budgeted cost for the work scheduled to be completed by a specific date. It

represents the value of the work planned to be done by that time.

Example: If a project has a total budget of $100,000 and is planned to be 30% complete after 3

months:

PV = $100,000 * 30% = $30,000

This means by the end of 3 months, the project was planned to deliver $30,000 worth of work.

2. Earned Value (EV)

Definition: EV is the value of the work actually completed by a specific date. It represents the

budgeted amount for the work that has been done so far.

Example: If the project is actually 25% complete after 3 months:

EV = $100,000 * 25% = $25,000

This means by the end of 3 months, $25,000 worth of work has been completed according to the

project plan.

3. Actual Cost (AC)

Definition: AC is the actual cost incurred for the work completed by a specific date. It represents how

much has actually been spent on the work done so far.

Example: If the project has spent $27,000 to achieve 25% of the work:

AC = $27,000

This means by the end of 3 months, the actual cost of completing 25% of the work is $27,000.
4. Cost Variance (CV)

Definition: CV is the difference between the earned value and the actual cost. It shows whether the

project is under or over budget.

Formula: CV = EV - AC

Example: CV = $25,000 (EV) - $27,000 (AC) = -$2,000

This indicates that the project is over budget by $2,000.

5. Schedule Variance (SV)

Definition: SV is the difference between the earned value and the planned value. It shows whether

the project is ahead or behind schedule.

Formula: SV = EV - PV

Example: SV = $25,000 (EV) - $30,000 (PV) = -$5,000

This indicates that the project is behind schedule by $5,000.

6. Cost Performance Index (CPI)

Definition: CPI is the ratio of earned value to actual cost. It measures the cost efficiency of the work

completed.

Formula: CPI = EV / AC

Example: CPI = $25,000 (EV) / $27,000 (AC) = 0.93

A CPI of 0.93 means that for every dollar spent, the project is earning only $0.93 worth of work.

7. Schedule Performance Index (SPI)

Definition: SPI is the ratio of earned value to planned value. It measures the efficiency of time

utilization in the project.


Formula: SPI = EV / PV

Example: SPI = $25,000 (EV) / $30,000 (PV) = 0.83

An SPI of 0.83 means that the project is progressing at 83% of the planned rate.

8. Estimate at Completion (EAC)

Definition: EAC is the expected total cost of completing all work on the project. It is calculated based

on performance to date.

Formula: EAC = BAC / CPI

Example: If the total budget (BAC) is $100,000 and the CPI is 0.93:

EAC = $100,000 / 0.93 = $107,527

This suggests that the project will likely cost $107,527 to complete, exceeding the original budget.

9. Estimate to Complete (ETC)

Definition: ETC is the expected cost to finish all remaining project work.

Formula: ETC = EAC - AC

Example: If EAC is $107,527 and AC is $27,000:

ETC = $107,527 - $27,000 = $80,527

This means that an additional $80,527 will be needed to complete the project.

10. Variance at Completion (VAC)

Definition: VAC is the difference between the budget at completion and the estimate at completion.

It indicates how much over or under budget the project will be.

Formula: VAC = BAC - EAC

Example: VAC = $100,000 (BAC) - $107,527 (EAC) = -$7,527

This indicates that the project is expected to exceed the budget by $7,527.

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