The Value of Earned Value Analysis: Measuring Project Performance with CPI and SPI

Tracking project performance is one of the biggest challenges in professional services and engineering. Teams often rely on gut feelings or simple completion percentages to gauge progress, but these methods do not provide a full picture. That is where Earned Value Analysis (EVA) comes in.

EVA helps project managers measure performance objectively using two key indicators: Cost Performance Index (CPI) and Schedule Performance Index (SPI). These metrics allow teams to understand whether a project is on track, over budget, or behind schedule before issues escalate.

Why Earned Value Analysis Matters

Unlike traditional progress tracking, EVA considers the value of work completed rather than just time spent or costs incurred. By comparing planned vs. actual performance, organizations can make informed decisions about resource allocation, budgeting, and risk management.

At Birdview, we have seen PS teams struggle with tracking project efficiency, often realizing too late that they are running behind schedule or over budget. Using EVA, teams can proactively identify problems, take corrective actions, and ensure successful project delivery.

Key Metrics: CPI and SPI

1. Cost Performance Index (CPI): Measures how efficiently the project is utilizing the budget.

• Formula: CPI = EV / AC
• A CPI > 1 means the project is under budget.
• A CPI < 1 means the project is over budget.

2. Schedule Performance Index (SPI): Measures whether the project is ahead or behind schedule.

• Formula: SPI = EV / PV
• An SPI > 1 means the project is ahead of schedule.
• An SPI < 1 means the project is behind schedule.

Where:

• EV (Earned Value): The value of work actually completed.
• AC (Actual Cost): The cost incurred so far.
• PV (Planned Value): The budgeted cost of work planned by this point.

Two Ways to Calculate EVA: Based on Hours and Based on Cost

Option 1: Earned Value Analysis Based on Hours

For teams primarily tracking hours, EVA can be applied by measuring the planned vs. actual hours spent.

• EV (Earned Value) = Total planned hours × % of work completed
• AC (Actual Cost) = Actual hours logged
• PV (Planned Value) = Planned hours up to the reporting period

Example: A project has 100 planned hours, spread over 10 weeks. At week # 7, 50% of work completed.

• EV = 100 × 0.5 = 50 hours
• AC = 60 hours (actual time spent so far)
• PV = 70 hours (planned time by now)

CPI = 50 / 60 = 0.83 (over budget)

SPI = 50 / 70 = 0.71 (behind schedule)

Option 2: Earned Value Analysis Based on Cost

For teams that track financial performance, mostly in engineering, EVA can be applied by multiplying hours by an internal rate and adding expenses.

• EV = (Total planned hours × Internal rate × % of work completed) + (Total planned expenses x % of work completed)
• AC = (Actual hours × Internal rate) + Actual expenses
• PV = (Planned hours × Internal rate) + Planned expenses

Example: A project has 100 planned hours at a rate of $100/hour, spread over 10 weeks, and planned expenses of $50,000. At week #7, 50% of work is completed, actual hours are 60, and actual expenses are $45,000.

• EV = (100 × $100 × 0.5) + (50,000 x 0.5) = $30,000
• AC = (60 × $100) + $45,000 = $51,000
• PV = (70 × $100) + $35,000 = $42,000

CPI = $30,000 / $51,000 = 0.59 (over budget)

SPI = $30,000 / $42,000 = 0.71 (behind schedule)

The Bottom Line: Using EVA to Drive Project Success

By implementing Earned Value Analysis, PS teams can stop relying on guesswork and start making data-driven decisions. Whether tracking progress by hours or by cost, CPI and SPI provide an early warning system to keep projects on budget and on schedule.

At Birdview, we have seen teams dramatically improve efficiency simply by adopting EVA principles. Birdview PSA can help automate these calculations and roll them up at the project and portfolio level, providing real-time insights to keep projects on track. How is your team tracking project performance? Share your thoughts in the comments.

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