What it is
Earned Value Management (EVM) is a technique for measuring project performance by comparing the value of work actually completed against what was planned and what it cost. It turns schedule and cost progress into objective numbers, so a project manager can detect slippage early instead of discovering it at the deadline. EVM is built on three base measures, all expressed in the same currency or effort unit:
- Planned Value (PV) — the budgeted cost of the work scheduled to be done by now (formerly BCWS).
- Earned Value (EV) — the budgeted cost of the work actually completed by now (formerly BCWP). This is the "value earned."
- Actual Cost (AC) — what that completed work actually cost (formerly ACWP).
The total budget for the project is the Budget at Completion (BAC). Everything else in EVM is derived from PV, EV, AC and BAC.
How it works in practice
From the three base measures you compute two variances and two indices.
1. Schedule performance. Schedule Variance (SV) = EV − PV. Positive means ahead of schedule, negative means behind. The Schedule Performance Index (SPI) = EV ÷ PV: above 1.0 is ahead, below 1.0 is behind. SPI of 0.8 means you are doing 80 cents of planned work for every scheduled dollar.
2. Cost performance. Cost Variance (CV) = EV − AC. Positive means under budget, negative means over. The Cost Performance Index (CPI) = EV ÷ AC: above 1.0 is under budget, below 1.0 is over. CPI of 0.9 means you are getting 90 cents of value for every dollar spent.
3. Forecasting. EVM does not just describe the past; it projects the finish. The simplest Estimate at Completion (EAC) = BAC ÷ CPI, which assumes current cost efficiency continues. The Estimate to Complete (ETC) is the remaining forecast spend, and the Variance at Completion (VAC) = BAC − EAC shows the projected overrun or underrun.
A worked example makes it concrete. Suppose a project has a BAC of €100,000 over 10 months. At month 5 you planned to be 50% done, so PV = €50,000. You have actually completed 40% of the work, so EV = €40,000, and you have spent AC = €45,000. Then SV = 40,000 − 50,000 = −€10,000 (behind schedule), CV = 40,000 − 45,000 = −€5,000 (over budget), SPI = 0.80 and CPI = 0.89. Projecting forward, EAC = 100,000 ÷ 0.89 ≈ €112,500 — a forecast overrun of about €12,500. The calendar said "halfway"; EVM says "behind and over."
| Metric | Formula | Reading |
|---|---|---|
| Schedule Variance (SV) | EV − PV | > 0 ahead, < 0 behind |
| Cost Variance (CV) | EV − AC | > 0 under budget, < 0 over |
| Schedule Performance Index (SPI) | EV ÷ PV | > 1 ahead, < 1 behind |
| Cost Performance Index (CPI) | EV ÷ AC | > 1 under budget, < 1 over |
| Estimate at Completion (EAC) | BAC ÷ CPI | Forecast total cost |
For EU-funded projects this rigour is not optional. The Financial Regulation demands sound financial management and accountability for public money, and EVM gives auditors and the steering committee an objective, comparable read on whether a project is on track — the same numbers, computed the same way, across every project. It is the quantitative backbone behind the Monitor & Control activity that runs through the whole PM² lifecycle.
Common points of confusion
- Spending the budget is not "earning" value. AC (money spent) and EV (value of work done) are different measures. A project can burn cash fast while completing little — that is exactly what a low CPI exposes.
- SPI is not the same as being on the calendar. SPI compares work done to work planned in budget terms, not elapsed time. Being at month 5 of 10 tells you nothing; SV and SPI do.
- A positive variance is good, a negative one is bad — but watch the sign convention. Both SV and CV are "EV minus something," so negative always means trouble (behind / over). Reversing the subtraction is a common arithmetic slip under exam time pressure.
Why it matters for EU project managers
EVM is the most calculation-heavy topic a project manager faces, and it is precisely the kind of thing an exam can test with a short scenario and a demand for a number. For EPSO/AD/429/26 Field 2 (ICT Project Management), expect to be given PV, EV and AC and asked for CV, SV, CPI, SPI or EAC, or to interpret what a CPI below 1.0 means for a project's finances. Knowing the formulas and their plain-English meaning is what the test rewards. Drill the calculations with the full study pack: Prep for AD7 ICT Project Management on Prep4EU