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84 Part 1 • SyStemS analySiS FundamentalS

The cost performance index is:
CPI 5 EV / AC
5 $13,125 / $17,000
5 .772
or 77.2 percent. This means the team is performing at a rate far below the expected rate of perfor-
mance. This figure will be used later.
The schedule performance index (SPI) is:
SPI 5 EV / PV
5 $13,125 / $15,000
5 .875
or 87.5 percent. Once again, the ratio that is lower than 1.0 means that the project is behind schedule.
Finally, there are two key variables that a systems analyst may want to calculate. They tell the
analyst how much it will cost to finish the project or task from this point onward. They are estimate
to complete (ETC) and estimate at completion (EAC).
Estimate to complete considers how the team has done in the past and estimates how much
additional money will be required to complete the project at its current rate of performance. It
is calculated by subtracting the earned value (EV) from the budget at completion (BAC). That
result is divided by the cost performance index (CPI) calculated earlier, as follows:

ETC 5 (BAC 2 EV) / CPI
Estimate at completion (EAC) represents the revised budget. It is the amount the entire
project or task will cost when it is finished. It is calculated by adding the actual cost (AC) to the
estimated amount of money it will take to complete the project (ETC). The equation is:
EAC 5 AC 1 ETC
In our ongoing example of the website development project, the estimate to complete the
project is:
ETC 5 ($18,000 2 $13,125)/.772 5 $6,315
This means that in order to finish the website, we will need to spend $6,315 more than we have
up to this point. The estimate at completion will be:
EAC 5 $17,000 1 $6,315
5 $23,315
which is significantly more than the $18,000 we originally budgeted for. Figure 3.28 shows how
some of these performance measures relate to the original schedule and budget and the revised
schedule and budget.
Figure 3.28
How the earned value
management (EVM) values PV = $15,000
relate to the planned and actual Originally Budgeted
development of the website. BAC = $18,000

Stage 1 Stage 2 Stage 3 Stage 4 Stage 5

EV = $13,125

AC = $17,000 ETC = $6,315 Revised Budget
EAC = $23,315

Time