In one line: Compare what you planned to spend, what the work you’ve done was worth, and what it actually cost. Three numbers tell you at once whether the project is behind schedule and whether it’s over budget.
Core idea
A budget report alone can mislead. Spending less than planned might mean efficiency, or it might mean the work simply hasn’t happened. Earned value management (EVM) solves that by measuring progress in the same units as cost. It is standard on U.S. government and defense programs, and the Defense Acquisition University’s one-page “Gold Card” summarizes it [1].
How it works
The three core quantities, at any point in time:
| Quantity | Older name | Meaning |
|---|---|---|
| Planned value (PV) | BCWS, budgeted cost of work scheduled | the budget for the work that should be done by now |
| Earned value (EV) | BCWP, budgeted cost of work performed | the budget for the work that is done |
| Actual cost (AC) | ACWP, actual cost of work performed | what that work actually cost |
Variances and indices (positive variances and indices above 1 are favorable):
Forecasts:
- Estimate at completion: a common simple form is , where BAC is the budget at completion. It assumes current cost efficiency continues.
- To-complete performance index (TCPI): the efficiency needed on the remaining work to finish on budget.
- Management reserve: budget held back for unknowns, outside the performance baseline.
Example: halfway through a year-long task budgeted at $100k, the plan says $50k of work should be done (PV). Only $40k worth is done (EV), at a cost of $48k (AC). So CPI is 0.83 and SPI is 0.80: behind schedule and over cost, and at that rate the task would finish near $120k.
In practice
EVM depends entirely on a good Work Breakdown Structure and an honest measure of “done.” Rules such as counting a work package as 0% until it starts and 100% only when it’s complete keep teams from claiming progress they haven’t made. Even without a formal system, thinking in earned-value terms helps any engineer report status credibly: we’ve spent X, finished Y worth of the work, and at this rate we’ll need Z.
Questions to ask yourself
- If I measured my project’s earned value today, would the SPI or the CPI worry me more?
- How do we decide that a task is “done,” and is that rule honest?
- At our current efficiency, what will this project really cost?
Connections
- Built on: Work Breakdown Structure, Project Scheduling.
- Financial view: Product Development Economics. Reserves for uncertainty: Risk Management.
- Capabilities exercised: Responsibility and Urgency to Deliver, Decision Making, Communicating and Advocacy.
Sources
- DAU - Earned Value Management Gold Card [1]
- Kurstedt and Kurstedt (2005) Project Management Handbook [2]