How can EVM improve your project estimates?

1 What is EVM?

EVM stands for earned value management, a technique that helps you measure the progress and performance of your project against your plan. EVM uses three key metrics: planned value (PV), earned value (EV), and actual cost (AC). PV is the amount of work you planned to complete by a certain date. EV is the amount of work you actually completed by that date. AC is the amount of money you spent to complete that work. By comparing these metrics, you can calculate the variance and the index of your project.

2 How to calculate variance and index?

Variance is the difference between what you planned and what you achieved. There are two types of variance: schedule variance (SV) and cost variance (CV). SV is the difference between EV and PV. CV is the difference between EV and AC. A positive variance means you are ahead of schedule or under budget. A negative variance means you are behind schedule or over budget. Index is the ratio of what you achieved to what you planned. There are two types of index: schedule performance index (SPI) and cost performance index (CPI). SPI is the ratio of EV to PV. CPI is the ratio of EV to AC. An index greater than 1 means you are ahead of schedule or under budget. An index less than 1 means you are behind schedule or over budget.

3 How to use EVM for estimation?

EVM can help you estimate the future performance of your project based on your current performance. You can use EVM to forecast the completion time, cost, and scope of your project. There are four main formulas you can use for estimation: estimate at completion (EAC), estimate to complete (ETC), to-complete performance index (TCPI), and variance at completion (VAC). EAC is the total cost of your project at completion. ETC is the remaining cost of your project to completion. TCPI is the performance index you need to achieve to complete your project within your budget. VAC is the difference between your budget and your EAC.

4 How to interpret EVM results?

EVM results can be used to identify the status and risks of a project, as well as communicate with stakeholders, adjust plans, and take corrective actions. If the SV or SPI is negative, it indicates you are behind schedule and may need to accelerate work, re-prioritize tasks, or negotiate a new deadline. A negative CV or CPI means you are over budget and may need to reduce costs, re-allocate resources, or request more funding. When the EAC is higher than the budget, it suggests exceeding the budget at completion and improving performance, reducing scope, or revising the budget may be necessary. If the ETC is higher than remaining budget, it implies securing additional funding, cutting expenses, or terminating the project is required. A TCPI higher than CPI suggests increasing efficiency, quality, or productivity is needed. Finally, a negative VAC indicates justifying variance, mitigating risks, or accepting a loss is in order.

6 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?