Project Management: Foundations to Practice · Cost Management and Earned Value Management
EVM Formulas and Forecasting
From three simple values, EVM derives a set of indices and forecasts that give a project manager a genuinely predictive view of where a project is headed, not just where it currently stands.
From PV, EV, and AC, several performance indices can be derived. The Cost Performance Index, CPI, equals EV divided by AC, and measures cost efficiency: a CPI of 0.85 means the project earns only 85 cents of value for every dollar spent [20]. The Schedule Performance Index, SPI, equals EV divided by PV, and measures schedule efficiency in the same way, expressing how much value is being earned relative to how much was planned to be earned by this point.
Key Takeaways
- CPI (EV/AC) measures cost efficiency; SPI (EV/PV) measures schedule efficiency, both as ratios relative to 1.0.
- CV (EV-AC) and SV (EV-PV) express the same information in dollar terms, which some stakeholders find more intuitive.
- EAC = BAC / CPI forecasts final project cost if current cost efficiency continues, providing an early warning of overruns.
- EVM forecasting extrapolates from demonstrated performance trends, making it a more sobering and reliable basis than optimistic hope for improvement.