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Earned Value Management in Plain Language

Earned value integrates scope, schedule and cost so a project can distinguish spending from accomplished work.

The three core values

  • Planned value (PV): baseline budget for work scheduled by the status date.
  • Earned value (EV): baseline budget for work actually completed by the status date.
  • Actual cost (AC): cost incurred for the completed work.

Basic measures

Cost variance (CV) = EV − AC
Schedule variance (SV) = EV − PV
Cost performance index (CPI) = EV ÷ AC
Schedule performance index (SPI) = EV ÷ PV

A CPI below 1 indicates less budgeted value has been earned than the cost incurred. An SPI below 1 indicates less work has been earned than planned. These indicators need context: measurement rules, data timing and scope changes can affect interpretation.

Forecasting

A simple estimate at completion is BAC ÷ CPI when current cost efficiency is assumed to continue. Other formulas may reflect remaining work, schedule effects or a bottom-up reassessment. Compare formula-based forecasts with management judgment and remaining-risk analysis.

Use objective progress rules

Earned value becomes misleading when work is credited based on subjective optimism. Define milestones, weighted steps, units completed or other evidence before reporting.

Management use: investigate trends and root causes. A single index should trigger questions, not automatic conclusions.