
As a project controls professional, one of the most important things to understand is that there are a huge number of different formulas that can make your life significantly easier on a daily basis — provided that you know when, where and how to utilize them properly. Have you ever spent countless hours of your precious time trying to figure out if the value of the project you’re working on is equal to the amount of money you’re actually spending to complete it? With earned value management and the following terms and formulas, you’ll never have to wonder again — you’ll know beyond the shadow of a doubt.
Earned Value Management Formulas
Earned Value (EV)
Earned Value is a term that refers to the cost of the work that has been completed expressed as the value of the performance budget assigned to that work. It’s not just the cost of the completing some work, it representing the value that has been earned by completing the work. This is commonly also referred to in the construction industry as the “budgeted cost of work performed,” or BCWP. Earned Value is calculated as the Budget At Completion multiplied by the Percent of Work Completed.
EV = BAC x % Complete
Planned Value (PV)
This term refers to the approved budget for work that is scheduled to be completed by a certain date in the future. Whereas Earned Value takes a look at how much you spent to get work done by a certain time, Planned Value is proactive in that it looks at how much you SHOULD HAVE spent at to get to a specified date. Planned Value is also referred to as Budgeted Cost of Work Scheduled or BCWS.
To find the Planned Value at any point in the project, simply add up all your planned costs up to that point. Often, your planned costs are referenced from the project’s baseline.
Actual Cost (AC)
As its name suggests, Actual Cost is a term used to describe the amount of money that you actually spent to get a certain task done by a certain time. Many construction professionals also call this the “Actual Cost of Work Performed,” or ACWP or just AC.
Like Planned Value, Actual Cost is a cummulative value that continues to grow as the project progresses.
Budget at Completion
Budget at Completion, also called BAC, is the total amount of money that you’re expecting to spend to finish a particular task or for the entire project. You arrive at this number by taking all of the estimates that you’ve already conducted and assumptions that you’ve made about things like schedule and work required and adding them together.
Schedule Variance (SV)
Schedule Variance is a number that tracks how long you thought a task would take during planning versus how long it actually took and how that relates to the money you’re spending. To find this number, begin with the Earned Value of your task and subtract from it the Planned Value. The number you’re left with is the amount of money that delays have cost you and your team so far.
SV = EV – PV
Cost Variance (CV)
Cost Variance allows you to see the discrepancy between the amount of value that you earned on a task and the actual cost that ask required to perform. To arrive at this number, take the Earned Value and subtract it from the Actual Cost.
CV = EV – AC
Schedule Performance Index (SPI)
Schedule Performance Index allows you to take a closer look at overall schedule efficiency on a project. It answers the question “am I using my time wisely?” SPI provides an instantaneous check on schedule at any point in the project. To calculate SPI, take the Earned Value of your task or project and divide it by the Planned Value.
SPI = EV / PV
Cost Performance Index (CPI)
Cost Performance Index lets you look at not just how much money you’re spending to complete a project, but how well that money is being utilized. CPI provides an instantaneous check on cost performance at any point in the project. To find this number, take the Earned Value of your task or project and divide it by the Actual Cost.
CPI = EV / AC
Estimate at Completion (EAC)
Estimate at Completion is a handy number to know because it allows you to estimate the total cost of a task as of today, taking into account the work that you’ve already done. Take the approved budget that you have for the entire task and subtract from it the cost variance for all of the work that you’ve done to date. The number you’re left with is your EAC.
EAC = BAC / CPI
Estimate to Complete (ETC)
The Estimate to Complete is the number that describes exactly what it will take to finish a particular task, accounting for all of the work that you’ve done up to this point. To find this number, take the Estimate at Completion and subtract from it the Actual Costs to Date.
ETC = EAC – AC
Get to know these core Earned Value Management formulas and keep them handy. Chances are you’ll need them soon.
Hi Michael
hope this message finds you in best health.
Many thanks for your email. Coincendently i had my superiors visited me last week from Italy (Astaldi). The Earned Value topic was the main in our discussion. I’m now in Turkey in their larger health campus project,Etlik as the PCS Manager.
I emphasize I do appreciate it.
Best regards
IMK
IMK, best of luck on your project. Thanks for reading!
Hello Michael,
Great !
This will be a complete set with those items :
BCWS : Budgeted cost of work scheduled
BCWP: Budgeted cost of work performed
ACWP : Actual cost work performed
Maybe an S-curve graph of a project in execution phase will be appropriate to show all those terms.
have you thought of the learning curve ? and its effect on the EVM ? I would like to contribute with an article about it from my own experience .
Keep up the good job !
Azad
Based on my experience, the success of implementing EVM in a project depends on the accurate calculation of the % of Physical work complete.
In a complex mega project, having multitude of activities, a comprehensive Progress Measurement System (PMS) has to be developed to calculate the actual % of work complete. The PMS can be based on man-hours or cost weightage basis.
With out an accurate progress measurement system, EVM will be of limited use for Project Controls personnel.
How about non man-hours? as we know that in the resource have 3 option (Labor, Materials, and Non-labor, how we can measure the Non-labor?
if The PMS can be based on man-hours so the Non-labor is not include to the EVM?
if Non-labor can be converted to the Labor, how to do it?
can we assume that the Non-labor as the Labor, so we can calculate Man-hours?
Please help me
Thank you in advance
Ujang Sonjaya
ujang.bopengineer@gmail.com
Great note Michael, it’s very appropriate at the moment
Thanks for giving such a nice article . The information you shared will help me to get a good knowledge.
Glad you liked it!
Hi Michael,
Good presentation of formulas. For your readers here is a comprehensive list of all EVM formulas
BR
Praveen Malik
Hi Michael,
Good presentation of formulas. For your readers here is comprehensive list of all EVM formulas – http://www.pmbypm.com/earned-value-management-formulas/
BR
Praveen Malik
Michael
thanks.
For calculating EAC, article says as EAC= BAC-CV, but the formula below the article says as EAC=BAC/CPI. the both formulas giving different values.
please advise.
regards
Mustafa
Project Manager
Cecon Contracting, Dubai
Mustafa, I’m not sure where you see EAC = BAC – CV, but the formual EAC = BAC / CPI is correct.
Actually there are 3 formulas for EAC since the EAC is the AC + Bottom-up ETC
1. For ETC at budget rate (i.e. future work will be accomplished at the planned rate) use: EAC = AC + (BAC-EV) = BAC – CV
2. For ETC at present CPI (CPI is expected to be the same for the reminder of the project) use: EAC = BAC/CPI
3 For ETC considering both SPI and CPI use: EAC = AC + [(BAC-EV)/(CPI*SPI)]
Thanks Bobby – that is correct and I’ll need to amend the article for completion.
I want to add these formula:
TEAC – Time Estimate At Completion (Duration / SPI)
ECD – Estimated Completion Date (Start Date + TEAC)
ECD will now then your realistic finish date using if your earned value is accurate.
Thanks,
Ferds
oppsss…it should read as ECD will now then your realistic finish date…if your earned value is accurate.
Install and test software for 100 servers over 10 days at $200 per server. Current situation: 5 days of work, 30 servers completed, $7800 total cost. Please calculate CPI, SPI, EAC, ECD.
The article is very important to me because of I am pursuing CCP. I want to do a presentation of cost control for my company and I would like to get one of power point presentations on the same.
Hi Ruwan,
Thanks for the feedback.
Here’s a link to this article in PDF format.https://www.planacademy.com/wp-content/uploads/2018/04/planacademy.com-7-Earned-Value-Management-Formulas-To-Know-For-Project-Controls.pdf
Enjoy!
Michael
Thanks for sharing this nice article. I’m teaching this subject to my master’s degree students. morethan I wrote &published textbook in Arabic language about 8 years ago. Now my task and effort are concerted on it implementation on Arabic construction
immediately .
best regards
In case of a well-planned project, Can the BAC equals the PV in any project or it must be bigger than the PV????
BAC can be bigger than PV which means that you had cost-overruns. You spent more than you planned to spend.