Managing Project Costs

The PMI Likes the Earned Value Method

What is the Earned Value Technique?

This is a method used to measure project performance against the project’s baseline. If there is a variance or a deviation from the baseline, Earned Value Management can point out the difference and let project managers and stakeholders make corrections that can put the project back into alignment with the baseline.

Earned value is a technique that can merge time, cost, and work completed as a way to analyze where the project stands and what needs to be “fixed” to get it back on course.

Project managers can use earned value as the basis of their reporting. It can be integrated into performance analysis and even forecasting future performance.

Project reports should always contain the Earned Value figures and the project managers interpretation of what they mean and why those indications were extracted from the numbers.

Here is a quick cheat-sheet for the EV calculations:

Acronym	Term
PV	Planned Value
EV	Earned Value
AC	Actual Value
BAC	Budget at Completion
EAC	Estimate at Completion
ETC	Estimate to Completion
VAC	Variance at Completion

Name	Formula
Cost Variance (CV)	EV-AC
Schedule Variance (SV)	EV-PV
Cost Performance Index (CPI)	EV/AC
Schedule Performance Index (SPI)	EV/PV
Estimate at Completion (EAC)	BAC/CPI or AC+ETC or AC+(BAC-EV)
Estimate to Completion (ETC)	EAC-AC
Variance at Completion (VAC)	BAC-EAC

Remember that if you are calculating a variance then it is EV minus something, and that EV comes first in a lot of the formulas.

What you really need is to do a number of practice sessions with the formulas.

This is only the basis of Earned value. There are a number of other formulas that you will still want to find an memorize for the exam.

I have found a number of resources that are incomplete with it comes to PMP exam formulas. The most complete that I have found is the PM Exam Formulas.

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