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7 - PROJECT COST MANAGEMENT

table 7-1. Earned Value calculations Summary table

Earned Value Analysis

Abbreviation Name Lexicon Definition How Used Equation Interpretation of Result
PV Planned The authorized budget assigned to The value of the work planned to be
Value scheduled work. completed to a point in time, usually
the data date, or project completion.
EV Earned Value The measure of work performed The planned value of all the work EV = sum of the planned
expressed in terms of the budget completed (earned) to a point in value of completed work
authorized for that work. time, usually the data date, without
reference to actual costs.
AC Actual Cost The realized cost incurred for the The actual cost of all the work
work performed on an activity during completed to a point in time, usually
a specific time period. the data date.
BAC Budget at The sum of all budgets established The value of total planned work, the
Completion for the work to be performed. project cost baseline.
CV Cost Variance The amount of budget deficit or The difference between the value of CV = EV – AC Positive = Under planned cost
surplus at a given point in time, work completed to a point in time, Neutral = On planned cost
expressed as the difference between usually the data date, and the actual Negative = Over planned cost
the earned value and the actual cost. costs to the same point in time.
SV Schedule The amount by which the project is The difference between the work SV = EV – PV Positive = Ahead of Schedule
Variance ahead or behind the planned completed to a point in time, usually Neutral = On schedule
delivery date, at a given point in the data date, and the work planned Negative = Behind Schedule
time, expressed as the difference to be completed to the same point
between the earned value and the in time.
planned value.
VAC Variance at A projection of the amount of budget The estimated difference in cost at VAC = BAC – EAC Positive = Under planned cost
Completion deficit or surplus, expressed as the the completion of the project. Neutral = On planned cost
difference between the budget at Negative = Over planned cost
completion and the estimate at
completion.
CPI Cost A measure of the cost efficiency of A CPI of 1.0 means the project is CPI = EV/AC Greater than 1.0 = Under planned
Performance budgeted resources exactly on budget, that the work cost
Index expressed as the ratio of earned actually done so far is exactly the Exactly 1.0 = On planned cost
value to actual cost. same as the cost so far. Other values Less than 1.0 = Over planned cost
show the percentage of how much
costs are over or under the budgeted
amount for work accomplished.
SPI Schedule A measure of schedule efficiency An SPI of 1.0 means that the project SPI = EV/PV Greater than 1.0 = Ahead of
Performance expressed as the ratio of earned is exactly on schedule, that the work schedule
Index value to planned value. actually done so far is exactly the Exactly 1.0 = On schedule
same as the work planned to be Less than 1.0 = Behind schedule
done so far. Other values show the
percentage of how much costs are
over or under the budgeted amount
for work planned.
EAC Estimate At The expected total cost of com- If the CPI is expected to be the same EAC = BAC/CPI
Completion pleting all work expressed as the for the remainder of the project, EAC
sum of the actual cost to date and can be calculated using:
the estimate to complete. If future work will be accomplished EAC = AC + BAC – EV
at the planned rate, use:
If the initial plan is no longer valid, EAC = AC + Bottom-up ETC
use:
If both the CPI and SPI influence the EAC = AC + [(BAC – EV)/
remaining work, use: (CPI x SPI)]
ETC Estimate to The expected cost to finish all the Assuming work is proceeding on ETC = EAC – AC
Complete remaining project work. plan, the cost of completing the
remaining authorized work can be
calculated using:
Reestimate the remaining work from ETC = Reestimate
the bottom up.
TCPI To Complete A measure of the cost performance The efficiency that must be TCPI = (BAC – EV)/(BAC – AC) Greater than 1.0 = Harder to
Performance that must be achieved with the maintained in order to complete on complete
Index remaining resources in order to meet plan. Exactly 1.0 = Same to complete
a specified management goal, Less than 1.0 = Easier to complete
expressed as the ratio of the cost to
finish the outstanding work to the
budget available.
The efficiency that must be TCPI = (BAC – EV)/(EAC – AC) Greater than 1.0 = Harder to
maintained in order to complete the complete
current EAC. Exactly 1.0 = Same to complete
Less than 1.0 = Easier to complete

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