In this guide
The short answer
Earned value compares planned work, completed work, and actual cost using the budget assigned to the work. Start with PV, EV, and AC, then calculate variances and performance indices. Explain the result in words before using it to make a forecast or recommend action.
Understand the three inputs
Planned value, PV, is the budget assigned to work scheduled by the reporting date. Earned value, EV, is the budget assigned to work actually accomplished. Actual cost, AC, is the cost incurred for that work. Use the same scope and reporting cutoff for all three.
Consider an original signage project with ten signs budgeted at $1,000 each. By Friday, the plan called for six completed signs. Four are complete under the agreed progress measurement rule, and the cost incurred is $5,000. PV is $6,000, EV is $4,000, and AC is $5,000.
Calculate cost and schedule variances
Cost variance compares earned value with actual cost. Schedule variance compares earned value with planned value. In this example, both results are negative, but they describe different comparisons.
| Measure | Calculation | Meaning |
|---|---|---|
| Cost variance, CV | EV - AC = $4,000 - $5,000 = -$1,000 | Cost incurred exceeds the budgeted value of accomplished work |
| Schedule variance, SV | EV - PV = $4,000 - $6,000 = -$2,000 | Less budgeted work is accomplished than planned by Friday |
Calculate CPI and SPI
Cost performance index, CPI, is EV / AC. Here it is $4,000 / $5,000 = 0.80. The project has earned $0.80 of budgeted work for each dollar of actual cost. Schedule performance index, SPI, is EV / PV. Here it is $4,000 / $6,000, approximately 0.67.
Both indices are below 1, indicating unfavorable performance against their respective comparisons. The indices are ratios without currency units. CV and SV are expressed in the same budget units as the inputs. If AC or PV is zero, the corresponding division is undefined; don't manufacture an index.
Read the limits before reporting a conclusion
SV is not a number of days late, and SPI alone does not tell you the forecast finish date. Check the schedule network, dependencies, remaining durations, and critical work. Some signs might be more important to the opening than others, even when their budgets match.
EV is also not sales revenue or a statement of business benefit. It is a progress measure in budget terms. Use the agreed earning method consistently, including any valid partial-progress rules. Spending more money does not create more EV, and an invoice delay does not make work cheaper if the cost has already been incurred.
Practice the arithmetic and the explanation
Now suppose the same project reports PV = $8,000, EV = $6,000, and AC = $6,000 at the next cutoff. Calculate CV, SV, CPI, and SPI before reading on. CV is $0, SV is -$2,000, CPI is 1.00, and SPI is 0.75.
The project is cost-efficient against the budgeted work accomplished, but less work is complete than planned. That is different from saying everything is fine because spending is below PV. Finish your review by naming the evidence you need about the unfinished signs and the action that evidence could support.
Your next step
Begin with trustworthy PV, EV, and AC. Calculate the comparison correctly, interpret it clearly, and investigate the work before choosing a response.
Sources and further reading
Use these sources for the full context and current guidance.
- Project Management InstituteEarned value management
- Project Management InstitutePMI Lexicon of Project Management Terms (registration may be required)
