Earned Value Management (EVM) is the single most powerful technique for answering the two questions every sponsor asks: are we on budget? and are we on schedule? — with numbers instead of opinions.
The three base values
Everything in EVM builds on three numbers, all measured at a status date:
| Value | Name | Meaning |
|---|---|---|
| PV | Planned Value | Budgeted cost of work scheduled to date |
| EV | Earned Value | Budgeted cost of work actually performed to date |
| AC | Actual Cost | What the performed work actually cost |
Add BAC (Budget at Completion — the total approved budget) and you can derive everything else.
Variances: how far off are we?
- Cost Variance: CV = EV − AC. Negative means over budget.
- Schedule Variance: SV = EV − PV. Negative means behind schedule.
Variances are in currency, which makes them easy to communicate: "we are ₹12 lakh over budget" lands harder than a ratio.
Indices: how efficient are we?
- CPI = EV ÷ AC. For every rupee spent, how much value did we earn? CPI 0.90 means you get 90 paise of work per rupee.
- SPI = EV ÷ PV. Are we progressing at the planned rate? SPI 0.85 means work is happening at 85% of the planned pace.
Rule of thumb: a CPI below 0.95 at 20% completion almost never recovers on its own. Research on hundreds of defence projects showed the CPI at the 20% point predicts the final overrun remarkably well.
Forecasting: where will we end up?
- EAC = BAC ÷ CPI — if current cost efficiency continues (the most common assumption).
- EAC = AC + (BAC − EV) — if the variance was a one-off and the rest goes to plan.
- EAC = AC + (BAC − EV) ÷ (CPI × SPI) — if both cost and schedule pressure will hit remaining work.
- ETC = EAC − AC — money still needed.
- VAC = BAC − EAC — final variance. Negative = overrun.
- TCPI = (BAC − EV) ÷ (BAC − AC) — efficiency required on remaining work to finish on budget. Above 1.10 is generally considered unachievable.
A worked example
Project: BAC = ₹1,00,00,000. At month 6: PV = ₹48,00,000, EV = ₹45,00,000, AC = ₹50,00,000.
- CV = 45 − 50 = −₹5,00,000 (over budget)
- SV = 45 − 48 = −₹3,00,000 (behind schedule)
- CPI = 45 ÷ 50 = 0.90
- SPI = 45 ÷ 48 = 0.9375
- EAC = 100 ÷ 0.90 = ₹1,11,11,111 — an 11% forecast overrun
- TCPI = (100 − 45) ÷ (100 − 50) = 1.10 — remaining work must run 10% more efficiently than planned. Time to act, not hope.
Making EVM work in practice
- Fix the baseline first. EVM against a bad baseline is theatre.
- Use objective progress rules — 0/100, 50/50, or physical percent complete from measurable quantities. Never "feels like 80%".
- Report trends, not snapshots. A CPI falling 1.02 → 0.97 → 0.93 over three months tells the real story.
- Act on TCPI. When TCPI passes 1.10, re-baseline or descope — the numbers won't fix themselves.
Try our free EVM Calculator to run these numbers on your own project in seconds.