ISYS90050 · It Project and Change Management
Earned Value Management (EVM)
Week 6's second calculation topic integrates scope, schedule and cost. It teaches the three elements — Planned Value, Actual Cost and Earned Value — the variances (CV = EV - AC, SV = EV - PV), the indices (CPI = EV/AC, SPI = EV/PV) and forecasting with ETC and EAC. A full EVM snapshot with interpretation and a forecast is the signature calculation of the subject and a near-certain exam long-answer.
What this chapter covers
- 01Three elements: PV = (planned % complete) x BAC; AC = actual cost incurred; EV = (actual % complete) x BAC
- 02BAC = Budget at Completion (total budgeted spend); at start BAC = EAC and CPI = 1
- 03Schedule Variance SV = EV - PV (>0 ahead, <0 behind); Cost Variance CV = EV - AC (>0 under, <0 over)
- 04Schedule Performance Index SPI = EV / PV (<1 behind); Cost Performance Index CPI = EV / AC (<1 over budget)
- 05Interpretation: negative variance = bad, index below 1 = bad, zero/one = on plan
- 06Estimate to Complete ETC = (BAC - cum EV) / cum CPI
- 07Estimate at Completion EAC = cum AC + (BAC - cum EV) / cum CPI
- 08Variance at Completion VAC = BAC - EAC
Full EVM snapshot with an ETC/EAC forecast
- +1The three elements. PV = (planned % complete) x BAC = (3/8) x 80,000 = 0.375 x 80,000 = $30,000. EV = (actual % complete) x BAC = 0.25 x 80,000 = $20,000. AC = $25,000 (given).
- +1Variances (dollars). CV = EV - AC = 20,000 - 25,000 = -$5,000 (over budget). SV = EV - PV = 20,000 - 30,000 = -$10,000 (behind schedule).
- +1Indices (ratios). CPI = EV / AC = 20,000 / 25,000 = 0.80 (only $0.80 of value per $1 spent). SPI = EV / PV = 20,000 / 30,000 = 0.667 -> about 0.67 (only 0.67 of planned work done).
- +1Estimate to Complete. ETC = (BAC - cum EV) / cum CPI = (80,000 - 20,000) / 0.80 = 60,000 / 0.80 = $75,000 needed to finish the remaining work at the current cost efficiency.
- +1Estimate at Completion. EAC = cum AC + (BAC - cum EV) / cum CPI = 25,000 + 75,000 = $100,000. The project is forecast to finish at $100,000 against an $80,000 budget — about 25% over (VAC = BAC - EAC = -$20,000).
Key terms
- Planned Value (PV)
- The approved budgeted value of the work planned as of a status date: PV = (planned % complete) x BAC. It is the schedule baseline in dollars.
- Earned Value (EV)
- The budgeted value of the work actually completed to date: EV = (actual % complete) x BAC. It is the pivot of every EVM formula.
- Actual Cost (AC)
- The total cost actually incurred for the work completed to date, read from the project's financials — there is no formula for it.
- Cost / Schedule Variance
- CV = EV - AC (positive = under budget, negative = over budget); SV = EV - PV (positive = ahead of schedule, negative = behind). Both are dollar figures.
- CPI / SPI
- Performance indices: CPI = EV / AC (value earned per dollar spent) and SPI = EV / PV (work done per dollar planned). Below 1 is bad, above 1 is good, exactly 1 is on plan.
- ETC / EAC
- Forecasts: Estimate to Complete ETC = (BAC - cum EV) / cum CPI is the money still needed; Estimate at Completion EAC = cum AC + (BAC - cum EV) / cum CPI is the forecast total cost. VAC = BAC - EAC.
Earned Value Management (EVM) FAQ
What is the difference between a variance and an index in EVM?
A variance is a dollar gap — CV = EV - AC and SV = EV - PV — so its sign tells you the size and direction of the problem (negative = over budget or behind). An index is a ratio — CPI = EV/AC and SPI = EV/PV — that tells you efficiency (below 1 = trouble, above 1 = good). Variances say how much; indices say how efficiently.
How do I forecast the final cost of a project with EVM?
Use the Estimate at Completion: EAC = cum AC + (BAC - cum EV) / cum CPI. The second term is the Estimate to Complete — the remaining budgeted work recalculated at the project's running cost efficiency (CPI). Comparing EAC with BAC (VAC = BAC - EAC) tells you the forecast overrun or underrun.
Why is EV the key number in every formula?
Earned Value is the budgeted value of the work truly finished, so it is the honest measure of progress. Comparing EV with what you planned to have done (PV) reveals schedule performance, and comparing it with what you actually spent (AC) reveals cost performance. Get EV wrong and every variance, index and forecast is wrong.
Can AI help me with EVM in ISYS90050?
Yes, as a study aid. Sia can generate fresh EVM snapshots, walk you through PV/EV/AC to the variances, indices and ETC/EAC forecasts, and check each line and interpretation. Use it to rehearse for the closed-book exam; it does not do your graded assessment, and University of Melbourne academic-integrity rules apply — confirm details on Canvas.
Exam move
EVM is the signature calculation of the subject, so drill a full snapshot until it flows: PV and EV from the percentages and BAC, AC from the figures, then CV/SV, CPI/SPI, and the ETC/EAC forecast. Anchor the sign rules once — negative variance bad, index below 1 bad, zero/one on plan — and always add the plain-English reading because the exam rewards interpretation, not just numbers. Memorise every formula for the closed-book paper and practise the forecasting step, which students most often drop. Rehearse two or three complete instances with fresh numbers under time pressure so the method, not the arithmetic, is what you are thinking about in the exam.
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