GSOE9820 · Engineering Project Management
Earned Value Management
Earned Value Management is the most quantitative and most heavily examined topic in the course (CLO 5): computing the three base measures (PV, EV, AC), the variances (CV, SV) and indices (CPI, SPI), and forecasting completion cost (EAC, ETC, VAC, TCPI). It is graded directly in the Week 8 Team-Based Learning exercise — solve-then-select multiple choice from a case — and recurs in the final Knowledge Quiz, so every formula and its interpretation must be automatic.
What this chapter covers
- 01The three base measures: PV (planned value), EV = % complete × BAC (earned value), AC (actual cost); BAC = budget at completion
- 02Cost variance CV = EV − AC (negative = over budget)
- 03Schedule variance SV = EV − PV (negative = behind schedule)
- 04Cost Performance Index CPI = EV/AC (<1 = over budget)
- 05Schedule Performance Index SPI = EV/PV (<1 = behind schedule)
- 06Estimate at Completion EAC = BAC/CPI (if current efficiency continues) and its variants
- 07Estimate to Complete ETC = EAC − AC; Variance at Completion VAC = BAC − EAC
- 08To-Complete Performance Index TCPI = (BAC − EV)/(BAC − AC) to still hit BAC
Forecast completion: EAC, ETC, VAC and TCPI
- +1Confirm CPI. CPI = EV/AC = 70/85 = 0.82 (below 1, so the project is cost-inefficient — earning $0.82 of value per $1 spent).
- +1EAC (current efficiency continues) = BAC/CPI = 200,000/0.82 = $243k (exactly 200,000 × 85/70 = $242.9k). This forecasts the total cost if performance stays as it is.
- +1ETC = EAC − AC = 243 − 85 = $158k — the forecast cost of the remaining work.
- +1VAC = BAC − EAC = 200 − 243 = −$43k — a forecast overrun of about $43k against the budget.
- +1TCPI (to still hit BAC) = (BAC − EV)/(BAC − AC) = (200 − 70)/(200 − 85) = 130/115 = 1.13. The team would have to run the remaining work about 13% more cost-efficiently than planned to finish within the original $200k — a hard ask given it has been running at 0.82, so recovery to BAC is unlikely without scope or resource change.
Key terms
- Planned Value (PV)
- The budgeted cost of the work planned to be done by the status date (also called BCWS). The schedule baseline read at the data date.
- Earned Value (EV)
- The budgeted cost of the work actually completed by the status date (also called BCWP); computed per element as EV = % complete × BAC. The pivot of every EVM formula.
- Actual Cost (AC)
- The real cost incurred for the work completed by the status date (also called ACWP). Compared with EV to reveal cost performance.
- CPI and SPI
- The performance indices: CPI = EV/AC (cost efficiency; <1 = over budget) and SPI = EV/PV (schedule efficiency; <1 = behind). Values above 1 are favourable; equal to 1 is on plan.
- Estimate at Completion (EAC)
- The forecast total cost. If current cost efficiency continues, EAC = BAC/CPI; other variants apply if remaining work is expected at the budgeted rate or is driven by both CPI and SPI.
- To-Complete Performance Index (TCPI)
- The cost efficiency the remaining work must achieve to still hit a target: to meet BAC, TCPI = (BAC − EV)/(BAC − AC). A TCPI far above the running CPI signals the target is unrealistic.
Earned Value Management FAQ
What are the core EVM formulas I must know?
The base measures PV, EV (= % complete × BAC) and AC; the variances CV = EV − AC and SV = EV − PV; the indices CPI = EV/AC and SPI = EV/PV; and the forecasts EAC = BAC/CPI, ETC = EAC − AC, VAC = BAC − EAC, and TCPI = (BAC − EV)/(BAC − AC). Learn each formula with its sign/interpretation, because the exam tests the reading as much as the arithmetic.
How do I read the signs?
For variances, negative is bad: CV < 0 means over budget, SV < 0 means behind schedule. For indices, below 1 is bad: CPI < 1 means over budget, SPI < 1 means behind schedule. CV must agree with CPI, and SV must agree with SPI — if they disagree, you have made an error. A project can be over budget but ahead of schedule, so read cost and schedule separately.
What is the difference between EAC and TCPI?
EAC forecasts what the project will cost if current performance continues (EAC = BAC/CPI). TCPI asks the reverse: what cost efficiency the remaining work would need to still finish within a target (BAC or EAC). If TCPI sits well above your current CPI, hitting the target is unrealistic without a change to scope, resources or reserves.
How is EVM assessed in GSOE9820?
It is the Week 8 Team-Based Learning exercise — a case study with a handful of solve-then-select multiple-choice questions under time (appeals allowed via a short PMBOK-referenced note) — and it recurs in the final Knowledge Quiz. Because it is the course's key quantitative topic and CLO 5, expect both calculation and interpretation questions.
Exam move
Make EVM reflexive, because it is the one topic where speed and accuracy both earn marks in a timed multiple-choice setting. Build a single reference card: base measures (PV, EV = %complete × BAC, AC, BAC), variances (CV = EV − AC, SV = EV − PV), indices (CPI = EV/AC, SPI = EV/PV) and forecasts (EAC = BAC/CPI, ETC = EAC − AC, VAC = BAC − EAC, TCPI = (BAC − EV)/(BAC − AC)). Then practise many PV/EV/AC/BAC sets, computing every quantity and — just as important — stating the interpretation (over/under budget, ahead/behind, forecast overrun, target realistic or not). Use the consistency checks: CV agrees with CPI, SV with SPI, and CPI < 1 forces EAC > BAC and VAC < 0. Vary the scenarios so some are over budget but ahead of schedule, to train the read rather than a memorised story. For the Week 8 exercise, rehearse solving fast and writing a one-line PMBOK-referenced justification in case you appeal. Ask Sia to drill you on fresh EVM sets and check both your numbers and your interpretations.
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