What Is Earned Value?
Earned Value (EV) is the budgeted cost of work actually completed on a project. It translates physical progress into a dollar amount, which lets you compare work done against both the plan and actual spending using a common unit: money.
The formula is: Earned Value (EV) = % Complete x Budget at Completion (BAC)
EV is the foundation of earned value management (EVM), a project performance methodology defined in the PMI PMBOK Guide. EVM integrates three data points: what you planned to spend (PV), what the completed work is worth (EV), and what you actually spent (AC). From these three numbers, you can derive every major cost and schedule performance metric.
A data center migration project has a BAC of $2,000,000. The team has completed 35% of the planned scope. EV = 0.35 x $2,000,000 = $700,000. This means the work done so far was budgeted at $700,000, regardless of what it actually cost.
EVM Key Metrics
Earned value management produces a set of standardized metrics that answer specific questions about project health. Here are the core metrics and what they tell you.
The Three Foundation Values:
- Planned Value (PV) - The budgeted cost of work scheduled to be done by a given date. Also called Budgeted Cost of Work Scheduled (BCWS).
- Earned Value (EV) - The budgeted cost of work actually completed. Also called Budgeted Cost of Work Performed (BCWP).
- Actual Cost (AC) - The actual money spent on work completed. Also called Actual Cost of Work Performed (ACWP).
Performance Indices:
- CPI (Cost Performance Index) = EV / AC. Values above 1.0 mean under budget per unit of work. Below 1.0 means over budget.
- SPI (Schedule Performance Index) = EV / PV. Values above 1.0 mean ahead of schedule. Below 1.0 means behind schedule.
Variance Metrics:
- CV (Cost Variance) = EV - AC. Positive is favorable. Negative means you are spending more than the work is worth.
- SV (Schedule Variance) = EV - PV. Positive means ahead of schedule. Negative means behind.
Forecasting Metrics:
- EAC (Estimate at Completion) = BAC / CPI. Forecasts total project cost at current spending efficiency.
- ETC (Estimate to Complete) = EAC - AC. How much more money is needed to finish.
- VAC (Variance at Completion) = BAC - EAC. Forecasted overrun or underrun at project end.
- TCPI (To-Complete Performance Index) = (BAC - EV) / (BAC - AC). Efficiency required on remaining work to hit the original budget.
How to Calculate Earned Value
Earned value calculation starts with BAC and percent complete. When you add AC and PV, you can derive the full EVM dashboard.
Worked example: An enterprise software implementation has a BAC of $1,200,000. At the status date, the project is 40% complete. Actual Cost to date is $520,000. Planned Value (the budget for work scheduled through today) is $480,000.
- EV = 40% x $1,200,000 = $480,000
- CV = $480,000 - $520,000 = -$40,000 (unfavorable, over budget)
- SV = $480,000 - $480,000 = $0 (on schedule)
- CPI = $480,000 / $520,000 = 0.923 (spending $1.08 for every $1 of work)
- SPI = $480,000 / $480,000 = 1.000 (on schedule)
- EAC = $1,200,000 / 0.923 = $1,300,108
- ETC = $1,300,108 - $520,000 = $780,108
- VAC = $1,200,000 - $1,300,108 = -$100,108 (forecasted overrun)
- TCPI = ($1,200,000 - $480,000) / ($1,200,000 - $520,000) = 1.059
This project is on schedule (SPI = 1.0) but over budget (CPI = 0.923). At the current rate, it will finish about $100,000 over budget. The TCPI of 1.059 means the team needs to improve cost efficiency by about 6% on all remaining work to hit the original budget.
EVM Formulas Reference
The table below lists all standard EVM formulas from the PMBOK Guide with their interpretations.
| Metric | Formula | Interpretation |
|---|---|---|
| EV (Earned Value) | % Complete x BAC | Budgeted value of work completed. The core EVM measure. |
| PV (Planned Value) | From baseline schedule | Budgeted value of work scheduled to date. Your spending plan. |
| AC (Actual Cost) | From accounting records | Actual money spent on completed work. |
| CV (Cost Variance) | EV - AC | Positive = under budget. Negative = over budget. |
| SV (Schedule Variance) | EV - PV | Positive = ahead of schedule. Negative = behind schedule. |
| CPI (Cost Performance Index) | EV / AC | Above 1.0 = under budget. Below 1.0 = over budget. 1.0 = on budget. |
| SPI (Schedule Performance Index) | EV / PV | Above 1.0 = ahead. Below 1.0 = behind. 1.0 = on schedule. |
| EAC (Estimate at Completion) | BAC / CPI | Forecasted total cost if current efficiency continues. |
| ETC (Estimate to Complete) | EAC - AC | How much more money is needed to finish the project. |
| VAC (Variance at Completion) | BAC - EAC | Positive = projected underrun. Negative = projected overrun. |
| TCPI (To-Complete Performance Index) | (BAC - EV) / (BAC - AC) | Efficiency needed on remaining work to meet BAC. Above 1.10 is a red flag. |
Source: PMI PMBOK Guide, Learning Library. EAC has multiple formula variations depending on assumptions about future performance. BAC / CPI assumes current cost efficiency will continue, which PMI research supports as the most reliable predictor after 20% completion.
Why Earned Value Matters
Earned value management provides something that basic budget tracking cannot: an objective measure of work completed relative to both plan and spend. Without EVM, a project can look healthy when it is not.
It detects hidden problems. A project that is 50% through its timeline and has spent 45% of its budget looks fine on a simple burn-down chart. But if only 30% of the work is complete, the project is in trouble. EVM reveals this: CPI = 0.67 (severe cost overrun per unit of work) and SPI = 0.60 (significantly behind schedule). Without earned value, the spending data alone is misleading.
CPI is a reliable predictor. PMI research across hundreds of Department of Defense projects showed that CPI measured at the 20% completion mark predicts final cost within 10% in the majority of cases. The finding has been confirmed across private-sector projects. Once CPI stabilizes, it rarely improves by more than 10%. This gives project sponsors an early, reliable forecast of whether the project will finish within budget.
It creates a common language. EVM gives stakeholders a standardized way to discuss project performance. Instead of vague statements like "the project is mostly on track," you can say "CPI is 0.92 and SPI is 0.87, projecting a $150,000 overrun and a three-week delay." Numbers create clarity. They also make it harder to hide problems behind optimistic narratives.
It supports better decisions. When a project shows CPI = 0.80 at 30% completion, the math is clear: continuing at this rate will produce a 25% cost overrun. The project sponsor can make an informed decision: add budget, cut scope, change approach, or cancel the project. Without EVM data, these decisions often get delayed until the overrun is too large to recover.
Common EVM Pitfalls
EVM is a powerful methodology, but it produces unreliable results when implemented poorly. These are the pitfalls that cause the most damage.
1. Subjective percent complete. This is the number one problem. If percent complete is inaccurate, every EVM metric is wrong. Teams commonly report 90% complete for weeks because the remaining work is harder than expected. Use objective measurement methods: weighted milestones (define specific milestones worth specific percentages), physical units (50 of 100 items installed = 50%), or fixed formulas (0% until complete, 100% when done). Avoid asking team members "what percent are you done?"
2. Misaligned baselines. PV must come from the approved project baseline, not a revised plan. If you rebaseline every time performance slips, SPI will always be near 1.0 and the metric becomes meaningless. Only rebaseline through formal change control when there is a legitimate scope change. Performance problems should be visible in the data, not hidden by baseline changes.
3. Ignoring schedule variance after the midpoint. SV and SPI become less useful as projects approach completion. A project that finishes all scope on the last day has SV = 0 at completion, even if it was months late. For schedule-critical projects, supplement SPI with milestone tracking and critical path analysis. Some practitioners use SPI(t), a time-based schedule performance index, to address this limitation.
4. Using EAC = BAC / CPI as the only forecast. The formula EAC = BAC / CPI assumes future work will be performed at the same cost efficiency as past work. This is a reasonable default, but it is not always accurate. If the overrun was caused by a one-time event (a vendor price increase that will not recur), a different EAC formula is more appropriate: EAC = AC + (BAC - EV). Use the formula that matches your situation.
5. Not tracking AC accurately. Earned value management requires timely, accurate cost data. If actual costs are reported with a two-month lag, CPI will be wrong for two months. If costs are misallocated between work packages, CPI will be wrong at the work-package level. Work with your finance team to establish cost reporting that matches EVM needs: by work package, with no more than a one-month lag.
6. Applying EVM to the wrong projects. EVM works best on projects with clearly defined scope and measurable deliverables. It is less effective for R&D projects where scope evolves constantly, or for pure support and maintenance work. For agile software projects, consider using agile EVM adaptations that measure earned value by story points completed rather than traditional work packages.
This calculator provides estimates for informational purposes only. It does not constitute financial or project management advice. Actual project metrics depend on your specific project conditions, baseline accuracy, and cost reporting practices. Consult your project controls team for precise EVM measurements. Formulas reference the PMI PMBOK Guide standards.