Earned value management (EVM) brings scope, time and money into one view of project performance. Its value is not the formula sheet alone but the discipline of defining planned work, verifying delivered results and relating both to actual expenditure. Without credible evidence of progress, a neat dashboard can make a struggling project look healthier than it is.<\/p>\n
This guide explains how to establish an EVM control process, measure the present situation and make useful decisions with project sponsors and delivery teams. It deliberately emphasizes reporting integrity and governance rather than detailed forecast scenario modeling, which belongs in a separate earned-value forecasting analysis<\/a>.<\/p>\n Start with an approved scope baseline and a work breakdown structure (WBS) that identifies what the project will deliver. Cost estimates should be mapped to work packages or control accounts with clear ownership, objective completion rules and time-phased budgets. If work packages are vague, a reported percentage complete can become an unsupported opinion rather than a measurable statement.<\/p>\n Consider a regional health service installing a secure appointment system. The WBS includes requirements approval, interface development, integration testing, staff training and production handover. Each work package has a budgeted value and acceptance standard. The approved calendar determines when that value was scheduled to be earned. These inputs provide a consistent basis for PV and EV.<\/p>\n Actual costs must be recognized consistently for the corresponding scope and period. Labor timesheets, supplier invoices and accruals may arrive on different dates. Keep a reconciliation between the project schedule, financial records and accepted deliverables. Money paid is not necessarily value earned; a purchase-order commitment is not identical to cash spent or work completed.<\/p>\n Planned value (PV) represents the approved budget for work scheduled through the reporting date. Earned value (EV) represents the budget assigned to work actually accomplished. Actual cost (AC) is what the performed work has cost. Budget at completion (BAC) is the total approved budget for the scope. These are values measured in monetary units, but EV does not represent invoiced revenue or profit.<\/p>\n If a work package has a budgeted value of $40,000 and passes four of five equally weighted, preapproved acceptance milestones, it might earn $32,000 under that measurement rule. A team cannot claim the final milestone merely because the calendar is nearly complete. Where milestones differ in complexity, preassign defensible weights instead of making them equal by habit.<\/p>\n Rules for percent complete, weighted milestones or quantities installed should be agreed before the team reports results. Some work has no meaningful partial acceptance and uses a zero\/one rule. Others can be physically measured. The important test is whether an independent reviewer can verify the numerator and denominator for reported accomplishment.<\/p>\n Cost variance (CV) equals EV \u2212 AC. Schedule variance (SV) equals EV \u2212 PV. Cost performance index CPI equals EV \u00f7 AC, and schedule performance index SPI equals EV \u00f7 PV. Negative variances and indices below 1.00 generally indicate unfavorable performance relative to the approved plan, provided the underlying records are comparable.<\/p>\n Suppose a public-sector portal has BAC $400,000. By a reporting date, the baseline PV is $180,000, accepted work has earned EV $160,000, and the project has incurred AC $200,000. CV = \u2212$40,000, SV = \u2212$20,000, CPI = 0.80 and SPI \u2248 0.889. The project has incurred more cost than the planned budget for completed work and has earned less progress than scheduled.<\/p>\n The two dimensions must be interpreted separately. A project can be under budget yet behind schedule if it has performed little work and spent even less; a project can be ahead of schedule and over budget. \u201cUnder budget\u201d cannot safely mean that total AC is less than BAC in the middle of execution. Compare costs to earned scope, not only to the entire available budget.<\/p>\nConnect scope and cost before measuring progress<\/h2>\n
Define planned value, earned value and actual cost<\/h2>\n
Derive useful present-tense performance indicators<\/h2>\n