EARNED VALUE CALCULATIONS

You are the project manager for the construction of 20 miles of sidewalk. According to your plan, the
cost of construction will be $15,000 per mile and will take 8 weeks to complete.

2 weeks into the project, you have spent $55,000 and completed 4 miles of sidewalk, and you want to
report performance and determine how much time and cost remain.

Below is the descriptive calculations. There is a summary set of formulae at the end of this sheet.

Budgeted at Completion (BAC): this is the original budget and can be calculated like this:

20 miles * $15K per mile = $300K for the whole project

Planned Value (PV) (a.ka. Budgeted Cost of work Scheduled (BCWS). The planned value is “how much
work was planned for this point in time”.

We are 2 weeks into an 8 week project, so a quarter of the work should be complete. A quarter of 20
miles is 5 miles and translates in budget terms to 5 miles * $15K each = $75K planned for the 2 weeks

Earned Value (EV) (a.ka. Budgeted Cost of Work Performed (BCWP):

Earned value is based on the assumption that as you complete work on the project, you are adding
value to the project. Therefore, it is simply a matter of calculating how much value you have "earned"
on the project.

We have completed 4 miles of work, and these are worth 4 miles * $15K each = $60K completed

Actual Cost (AC): this is the amount of cost you have incurred at this point, and we are told in the
example that we have spent $55,000 to date.

AC = $55K

Cost Variance (CV): this is how much actual costs differ from planned costs. We derive this by calculating
the difference between EV and AC.

 A positive CV is a good thing. It indicates that we are doing better on costs than we had planned.
Conversely, a negative CV indicates that costs are running higher than planned.

 CV = EV-AC

 CV = $60,000 - $55,000

Prepared by Edward Shehab – BostonMC.com

  CV = $5,000

Cost Performance Index (CPI): this index gives us an indicator as to how much we are getting for every
dollar. It is derived by dividing Earned Value by the Actual Cost.

 A CPI of 1 indicates that the project is exactly on track. A closer look at the formula
reveals that values of 1 or greater are good, and values less than 1 are undesirable.

 CPI = EV / AC

 CPI = $60,000/$55,000

 CPI = 1.09

 This figure tells us that we are getting $1.09 worth of performance for every $1.00 we
expected.

Schedule Variance (SV): this is how much our schedule differs from our plan, expressed in dollars. SV is
derived by calculating the difference between EV and PV.

 A negative variance (as in this case) reflects that we are not performing as well as we
had hoped in terms of schedule. A positive SV would indicate that the project is ahead
of schedule.

 SV = EV-PV

 SV = $60,000 – $75,000

 SV = -$15,000

Schedule Performance Index (SPI): this tells us how fast the project is progressing compared to the
project plan. It is derived by dividing earned value by the planned value.

 SPI = EV / PV

 SPI = $60,000 / $75,000

 SPI = 0.80

 This tells us that the project is progressing at 80% of the pace that we expected it to,
and when we look at the example, this conclusion makes sense.

 We had expected to lay 20 miles of sidewalk in 8 weeks. At that rate, after 2 weeks, we
should have constructed 5 miles, but instead the example tells us that we had only
constructed 4 miles.

 That equates to 4/5 performance, which is 80%.

Prepared by Edward Shehab – BostonMC.com

  Like the cost performance index, values of 1 or greater are good, and values that are less
than 1 are undesirable.

Estimate at Completion (EAC): this is the amount we expect the project to cost, based on where we are
relative to cost and schedule.

 To calculate EAC, take the BAC and divide it by our cost performance index.

 EAC = BAC / CPI

 EAC = $300,000 / 1.09

 EAC = $275,229.36

 This should make sense. We are doing better on costs than we had originally planned,
and this value reflects that.

Estimate to Complete (ETC): this is simply how much more we expect to spend from this point forward
based on what we've done so far. It can be easily backed into by taking our estimate at complete (what
we expect to spend) and subtracting what we have spent so far (Actual Cost).

 ETC = EAC – AC

 ETC = $275,229.36 - $55,000

 ETC = $220,229.36

 This tells us that we expect to spend $220,229.36 more, given our performance thus far.

Variance at Completion (VAC): this is the difference between what we originally budgeted and what we
expect to spend.

 A positive variance indicates that we are doing better than projected, and a negative
variance indicates that we expect the project to run over on costs.

 VAC = BAC – EAC

 VAC = $300,000 - $275,229.36

 VAC = $24,770.64

To Complete Performance Index (TCPI): this is a “projection of cost performance that must be achieved
on the remaining work to meet a specified management goal, such as the budget at completion (BAC) or
the estimate at completion (EAC). It is the ration of “remaining work” to the “funds remaining””.

To Complete Performance Index based on BAC

Prepared by Edward Shehab – BostonMC.com

  TCPI based on BAC = (BAC – EV)/(BAC-AC)

 TCPI = ($300,000 - $60,000)/($300,000 - $55,000)

 TCPI = $240,000/$245,000 = 0.98

To Complete Performance Index based on EAC

 TCPI based on EAC = (BAC – EV)/(EAC-AC)

 TCPI = ($300,000 - $60,000)/($275,229 - $55,000)

 TCPI = $240,000/$220,229 = 1.09

SUMMARY OF FORMULAE:

BAC = $300k

AC = $55K

EV = $60K

CV = EV – AC = $60K - $55K = $5K

CPI= EV / AC = $60K / $55K = 1.09

SV = EV – PV = $60K - $75K = - $15K

SPI = EV / PV = $60K / $75K = 0.80

EAC = BAC / CPI = $300,000 / 1.09 = $275,229.36

ETC = EAC – AC = $275,229.36 - $55,000 = $220,229.36

VAC = BAC – EAC = $300,000 - $275,229.36 = $24,770.64

Prepared by Edward Shehab – BostonMC.com