Project Monitoring and Control
Earned value and corrective action
Earned value management integrates scope, schedule, and cost. Planned value (PV) is the budgeted cost of work scheduled; earned value (EV) is the budgeted cost of work performed; actual cost (AC) is the cost incurred. Variances are CV = EV − AC and SV = EV − PV. Positive values are favorable. Indices are CPI = EV/AC and SPI = EV/PV; values above 1.0 are favorable. SV is expressed in currency, not time, which is a frequent exam trap.
Forecasting uses the performance measurement baseline. A common estimate at completion when remaining work is expected to continue at the current cost efficiency is EAC = AC + (BAC − EV)/CPI. If the current CPI is expected to persist for all work, EAC = BAC/CPI. Do not mix formulas without stating the assumption. Also distinguish authorized baseline changes from unauthorized scope growth.
Worked example
BAC = $100,000; PV = $45,000; EV = $40,000; AC = $50,000. CV = $40,000 − $50,000 = −$10,000 (over budget). SV = $40,000 − $45,000 = −$5,000 (behind schedule). CPI = 0.80; SPI ≈ 0.889. Using EAC = AC + (BAC − EV)/CPI = $50,000 + $60,000/0.80 = $125,000. Rule of thumb: investigate the drivers behind a CPI or SPI deviation before forecasting.