2. EVM Walkthrough Page 1
Scenario:
Building a house
Start Date: January 2011
Expected to complete construction: December 2014 (36 months)
Total Cost of Ownership: ₹ 17,00,000 (Budget at complete)
Today – 31st
August 2014. Its 18 months since the start of the project that is 50% of the project time.
We have already spent ₹ 13,50,000 on building the house, that is about 80% of the cost.
As per the schedule, 80% of the work was to be completed by end of 18 months. But only 50% of the
work is completed.
Planned Value is ₹ 13,50,000 (What was planned to be completed till date)
Earned Value (% of completion * BAC) is ₹ 8,50,000 ( Value of the Actual work completed in respect to
the original budget)
Actual Cost ₹ 10,50,000 (Actual money spent)
3. EVM Walkthrough Page 2
Now with these basic assumptions and determinations,
COST
Cost Variance:
CV = EV – AC
Difference between what we should have spent by now based on the work completed in reality and what
was money actually spent for completing this work. As this is a project, Earned Value, even though called
as “earned” represents the spending.
CV = 850000 – 1050000 = - 200,000
We have actually spent more than what was supposed to be spent.
So, if CV is positive, the project is running below budget and if it’s negative, its running over budget
Cost Performance Index:
CPI = EV / AC
Tell us how much work we are able to get out of every unit of money we are spending.
CPI = 850000 / 1050000 = 0.81
Cost efficiency of the work is about 81%, which means we are getting 19% less for every unit of money
spent.
So, if CPI is greater than 1, it means that we are getting more for every unit of money spent and if its less
than 1 then it means that there is lack of efficiency.
SCHEDULE
Schedule Variance:
SV = EV – PV
This defines what was planned to be spent by this time line and what was spent in terms of the budgeted
work.
SV = 850000 – 1350000 = -500,000
A negative SV means that the project is way behind schedule. A positive means that the project is ahead
of schedule.
4. EVM Walkthrough Page 3
A positive schedule variance always is not a good sign. It can also mean that the project was not
planned properly or not budgeted properly. It may also mean that the project will be completed
before schedule and there may be cases when the customer does not want the delivery before time.
Schedule Performance Index:
SPI = EV / PV
This is also used to determine if the project is ahead of schedule or behind schedule.
SPI = 850000 / 1350000 = 0.63
A SPI of greater than 1 signifies that the project is ahead of schedule and less than 1 signifies that its
behind schedule.
5. EVM Walkthrough Page 4
Budget at Complete is the actual budget of the project which was determined.
BAC = 17,00,000
Estimate to Complete is the value of remaining work to be completed.
ETC = BAC – EV
ETC = 1700000 – 850000 = 850000
This is the amount of work to be completed based on the original budget.
Estimate at Completion
It the estimated value of the total project based on the current status of the project.
EAC = BAC / CPI
The CPI provides the value at which the project is progressing now.
EAC = 1700000 / 0.81 = 2,098,765
This is the estimate cost of the project when it is completed.
This is based on an assumption that the project will progress as it had progress all these
days. If there are any changes to the project, like more resources are added, etc, then the EAC will
vary accordingly. Obviously, the assumed CPI from now on, will be provided in that case.
EAC = AC + ETC
This can also be calculated based on the actual costs which were incurred and the planned cost to
be spent for the rest of the project.
EAC = 1050000 + 850000 = 1,900,000
This is used when the original estimate was fundamentally flawed or the conditions of the
project have changed invalidating the original assumptions.
EAC = AC + (BAC – EV)
EAC can also be calculated when the project scenario is atypical in the future and we feel that the
budget is more reliable.
EAC = 1050000 + (1700000 – 850000) = 1,900,000
6. EVM Walkthrough Page 5
EAC = AC + ((BAC – EV) /(CPI * SPI))
The above formula can be used to calculate the EAC of the project, when you want to stick to
your schedule for completion.
EAC = 1050000 + ((1700000-850000) / (0.81*0.63) = 2,715,687
Estimate to Complete (ETC) can also be calculated if the EAC is provided.
ETC = EAC – AC
ETC = 1900000 – 1050000 = 850000
We have assumed the value of EAC
The difference between the estimated value to complete the project and the money already spent.
ETC = BAC – EV
ETC = 1700000 – 850000 = 850000
If you plan to stick to your budget, then use the budgeted figures, and the difference between what was
planned and the value of work done as per original plan. This assumes that the project is going to be
atypical, ie. It’s not going to be how it was all these days.
ETC = (BAC - EV) / CPI
ETC = (1700000 – 850000) / 0.81 = 1,049,383
If you feel that that the project will perform the way it has performed all these days, till the time of
completion of the project (Typical), then this is the way to calculate, along with the cost index for
performance.
If you notice, when the performance index is added, the cost increases, showing that if there is no
measure to bring the project back to original plan, the cost will increase substantially.
If you feel that the original estimate was itself flawed, ETC can be calculated only be preparing a
new estimate from this point in time.
Variance At Complete gives the difference between the budgeted value and estimated value of
completing the project.
7. EVM Walkthrough Page 6
VAC = BAC – EAC = 1700000 – 1900000 = -200,000
This shows the extra money which needs to be spent on completing the project.
Obviously, when VAC is less than 0, its good because there is some saving expected and when its above
zero then there is some money which is to be spent more than what was budgeted.
To Complete Performance Index:
This tells us as per the BAC or the EAC, what is the work which is to be completed vis-à-vis the fund
which is available to complete the work.
Based on the Budget (BAC)
TPCI = (BAC – EV) / (BAC – AC)
TPCI = (1700000 – 850000) / (1700000 – 1050000) = 1.31
Or Based on EAC
TCPI = (BAC - EV) / (EAC - AC)
TPCI = (1700000-850000)/ (2098765-1050000) = 0.81
TPCI greater than 1 signifies that the fund required is more than what is available now, and so the Project
manager has to be stringent in allocating it.
