PMP Exam Flashcards: Earned Value Management, CPI, SPI, EVM Formulas

Earned value management, or EVM, is a project performance measurement technique that integrates scope, schedule, and cost data to assess project health objectively. It compares three key values: Planned Value, or PV, which is the budgeted cost of work scheduled; Earned Value, or EV, which is the budgeted cost of work actually completed; and Actual Cost, or AC, which is the real cost incurred for work completed.

The Schedule Performance Index, or SPI, measures schedule efficiency by dividing Earned Value by Planned Value. SPI equals EV divided by PV. An SPI of 1.0 means the project is exactly on schedule. An SPI greater than 1.0 means the project is ahead of schedule, completing more work than planned. An SPI less than 1.0 means the project is behind schedule, completing less work than planned. For example, an SPI of 0.8 means the project is only completing 80 percent of the work planned for this point in time.

The Cost Performance Index, or CPI, measures cost efficiency by dividing Earned Value by Actual Cost. CPI equals EV divided by AC. A CPI of 1.0 means the project is exactly on budget. A CPI greater than 1.0 means the project is under budget, getting more value for each dollar spent. A CPI less than 1.0 means the project is over budget, spending more than planned for the work accomplished. For example, a CPI of 0.9 means the project is getting only 90 cents of value for every dollar spent.

The Estimate at Completion, or EAC, forecasts the total project cost based on current performance. The most common formula is Budget at Completion divided by CPI, written as EAC equals BAC divided by CPI. This assumes current cost performance will continue for the remaining work. For example, if the total budget is 100,000 dollars and the CPI is 0.8, the EAC is 125,000 dollars, meaning the project will cost 25,000 dollars more than planned.

The Variance at Completion, or VAC, is the difference between the original Budget at Completion and the Estimate at Completion, calculated as BAC minus EAC. A positive VAC means the project is expected to finish under budget. A negative VAC means the project is expected to exceed the budget. For example, if BAC is 200,000 dollars and EAC is 220,000 dollars, the VAC is negative 20,000 dollars, indicating the project will be 20,000 dollars over budget.

The To-Complete Performance Index, or TCPI, calculates the cost performance required on the remaining work to meet a specific financial target. TCPI equals the remaining work divided by the remaining funds, written as BAC minus EV divided by BAC minus AC when targeting the original budget, or BAC minus EV divided by EAC minus AC when targeting the revised estimate. A TCPI greater than 1.0 means the team must perform more efficiently than they have been to meet the target, which becomes increasingly unrealistic as the value rises above 1.1.

Schedule Variance, or SV, equals Earned Value minus Planned Value. A negative SV means the project has completed less work than planned at this point in time, indicating the project is behind schedule. A positive SV means more work has been completed than planned, indicating the project is ahead of schedule. An SV of zero means the project is exactly on schedule. For example, if PV is 50,000 dollars and EV is 40,000 dollars, SV is negative 10,000 dollars, meaning the project is behind by 10,000 dollars worth of scheduled work.

Cost Variance, or CV, equals Earned Value minus Actual Cost. A negative CV means the project has spent more than the budgeted amount for the work completed, indicating the project is over budget. A positive CV means less was spent than budgeted, indicating the project is under budget. A CV of zero means the project is exactly on budget. For example, if EV is 40,000 dollars and AC is 45,000 dollars, CV is negative 5,000 dollars, meaning the project has overspent by 5,000 dollars for the work accomplished. ---