This document discusses earned value management (EVM) and how it can be used to objectively measure and report on project performance and forecast completion. EVM relies on measuring actual work completed against planned budgets and schedules using components like planned value, earned value, actual costs, schedule variance, and cost variance. These measurements can help determine estimates at completion, estimates to complete, and a to-complete performance index to forecast project risks and remaining resource needs. An example project is provided to demonstrate how to calculate these key EVM metrics.

2. As a PROJECT MANAGER, did you
◦ Prepare “Regular Project Status Reports” ?
◦ Understood the “Performance Variance” ?
◦ Attempt to highlight the “Current Project Performance” ?
◦ Derive and communicate “Project Forecast” ?
If your answers to any of above is “NO”,
Please continue to read on……..
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3. EVM is one of the widely used scientific
approach to measure, analyze, integrate
project data to accurately report on
current project performance and
forecast the required performance for
completion.
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4. Relies on assumptions, interpretations
based on high level work status
Lack of any measured data and facts
Project Health (Red/Amber/Green) is
debatable and subjective
Relies on measured values derived from
triple constraints – Scope, Time and Cost
Project Status reported based on defined
matrix
Unambiguous, No Assumptions
Easily understandable by Stakeholders
Green
OR Red
?
What
IF…??
?
Can defend the
current Project Status
Assertive
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5. Scope
Cost
----
----
---- ----
Timeline
Project’s performance based on information On Scope, Cost and Time at a given
point in time.
This is compared against Scope Baseline, Cost Baseline and Schedule Baseline.
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6. So, What is
Earned Value (EV)?

7.  Objective method to measure project
progress.
 Helps to determine if a project is on track.
 Indicator of current project performance.
 Provides early warnings and trends on any
cost and/or schedule over runs.
 Helps to derive the Project Forecasts on Cost
and Timelines.
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Earned Value is an

8.  Indicates how much of “Value” you have
“Earned” on the project at any given point
of time.
 Helps determine variance against Planned
Value (PV).
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9. EVM - Key measurement components
 Planned Value (PV) – Is the “Authorized Budget” to be
expended for an activity, work package, Milestone or to
the project at a given point.
 Budget At Completion (BAC) – “Total Planned Value
(PV)” at the end of the project
 Earned Value (EV) – The “Value of Work Performed”
expressed in terms of the Authorized Budget
 Actual Cost (AC) – “Cost Incurred or Expended for
the Work” performed at a given point to complete an
Work Package or accomplish a Milestone.
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10.  Earned Value – Key Components
PV = Planned % complete X BAC
EV = Actual % complete X BAC
AC = Cumulative money spent till date
 Performance Reviews
Variances Analysis
Schedule Variance (SV) = EV – PV (SV > 0, Good)
Cost Variance (CV) = EV – AC (CV > 0, Good)
Variance At Complete (VAC) = BAC – EAC (VAC > 0, Good)
 Performance Indicators
Schedule Performance Index (SPI) = EV / PV (SPI > 1, Good)
Cost Performance Index (CPI) = EV / AC (CPI > 1 Good)
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11. A Forecast
 Helps to determine Revised likely Budgets using
performance measurements.
 Helps to determine
 “Estimate At Complete (EAC)” . This indicates the revised
BAC and may requirea approval from sponsor if variance
between BAC and EAC is quite marginal
 “Estimate To Complete (ETC) ”. This indicates the amount
required to to complete the rest of the project.
 “To-Complete-Performance-Index”. This is an indicator of how
much speed(performance) is required to be applied in order
to catch up with the plan in the remaining period of the project
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12. EAC – Three methods
◦ EAC = AC + BAC – EV (when initial assumptions were flawed)
◦ EAC = BAC / cumulative CPI (assuming similar CPI would continue)
◦ EAC = AC + ((BAC – EV) / cumulative CPI X cumulative SPI )
(trying to factor both schedule and cost performances)
ETC = EAC-AC
To-Complete-Performance-Index
◦ TCPI = work remaining / funds remaining
◦ TCPI = (BAC - EV) / (BAC - AC) Based on BAC
◦ TCPI = (BAC - EV) / (EAC - AC) Based on EAC
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13. Time (in Weeks) 
Deliverables
1 2 3 4 5 6 7
A
B
C
D
E
100%
75%
50%,
$500
$2000
$800
$5000
$600
20%
0%
PV= $4900
$600
$2500
$600
$2000
EV= $3400
AC= $5700
$0
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BAC= $8900

14. Let us consider the following example to understand the concepts better
An ERP implementation project for ABC company is estimated to
cost $500,000 with an estimated duration of 40 weeks. At the
end of 10 weeks the project is 20% complete with $150,000
being already spent on the project.
Exercise:
1. Identify what is BAC and AC
2. Calculate PV, EV, CV, SV, CPI, SPI, EAC, ETC, TCPI, VAC
Please Watch our next video for explanation of this Exercise.
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