Earned Value Management Fundamentals
Core concepts
Earned Value Management (EVM) integrates scope, schedule, and cost by converting planned and completed work into a common unit of measure. The three building blocks are Planned Value (PV, the budgeted cost of work scheduled), Earned Value (EV, the budgeted cost of work performed), and Actual Cost (AC, the cost actually incurred for the work performed). From these, four derived metrics follow: Cost Variance (CV = EV − AC), Schedule Variance (SV = EV − PV), Cost Performance Index (CPI = EV ÷ AC), and Schedule Performance Index (SPI = EV ÷ PV). Budget at Completion (BAC) is the total authorized budget; Estimate at Completion (EAC) forecasts total cost.
Traps to watch
Candidates lose points by confusing EV with AC, or by treating SV as a pure time measure - SV and SPI are expressed in cost (or unitless) terms, not days. Another frequent trap: a positive variance is always favorable, but the interpretation flips for variances expressed as cost versus time. Watch for questions that mix up CPI and SPI direction: CPI below 1.0 means cost overrun; SPI below 1.0 means behind schedule. Also remember EVM measures work scope, not elapsed time, so SPI can mislead near the end of a project.
Rule of thumb
Variance signs: positive = good (under budget / ahead), negative = bad. Index values: above 1.0 = good, below 1.0 = bad.
Worked example
BAC = $100,000. PV = $40,000, EV = $30,000, AC = $36,000. CV = 30,000 − 36,000 = −$6,000 (over budget). SV = 30,000 − 40,000 = −$10,000 (behind). CPI = 30,000 ÷ 36,000 = 0.833. SPI = 30,000 ÷ 40,000 = 0.75.