Earned Value Management Formulas
Mastering Earned Value Management (EVM) means mastering its formulas. Whether you are managing a multi-million dollar construction project or preparing for your PMP® exam, understanding how these metrics interlock is crucial.
The 15 Core EVM Terms (Including Old Names)
| Abbreviation | Old Name (Still on PMP) | Full Name | Meaning |
|---|---|---|---|
| BAC | — | Budget at Completion | Original project budget |
| PV | BCWS | Planned Value | Budgeted cost of work scheduled |
| EV | BCWP | Earned Value | Budgeted cost of work performed |
| AC | ACWP | Actual Cost | Actual cost of work performed |
| CPI | — | Cost Performance Index | Cost efficiency (above 1 is good) |
| SPI | — | Schedule Performance Index | Schedule efficiency (above 1 is good) |
| CV | — | Cost Variance | Cost deficit/surplus ($) |
| SV | — | Schedule Variance | Schedule deficit/surplus ($) |
| EAC | — | Estimate at Completion | Forecasted total project cost |
| ETC | — | Estimate to Complete | Forecasted remaining cost |
| VAC | — | Variance at Completion | Forecasted budget surplus/deficit |
| TCPI | — | To-Complete Perf. Index | Efficiency needed on remaining work |
The 4 EAC Formulas (When to Use Which)
Estimate at Completion (EAC) does not have just one formula. According to PMBOK 6th Edition p.265, you must choose the right formula based on your project's current reality.
1. Typical Performance Continues (Most Common)
When to use: You expect your team's past cost performance to continue at the same rate. This is the default EAC formula used in most software and the most commonly tested on the PMP exam.
2. Future Work at Planned Rate (One-Time Variance)
When to use: The variance was a one-time event not expected to recur. All future work will proceed exactly as originally budgeted.
3. Remaining Work at Current Efficiency
When to use: Both past and future work are affected by the same sustained CPI impact. Note: this formula is mathematically identical to EAC = BAC / CPI (see derivation below).
4. Both Cost AND Schedule Factored In
When to use: Your project is behind schedule and you must meet the original deadline. Because you have to rush (overtime, extra resources), the schedule delay will cause additional cost overruns.
Two Complete Worked Examples
Example A: The Struggling Project
A software project has a BAC of $100,000. Currently, PV = $40,000, EV = $30,000, and AC = $45,000.
- CPI = EV / AC = 30,000 / 45,000 = 0.67 (Severe cost overrun)
- SPI = EV / PV = 30,000 / 40,000 = 0.75 (Behind schedule)
- EAC (Formula 1) = 100,000 / 0.67 = $149,253 (Projected to cost ~50% more than planned)
- ETC = 149,253 - 45,000 = $104,253 (Money still needed to finish)
Example B: The Ahead-of-Schedule Project
A construction project has a BAC of $500,000. Currently, PV = $200,000, EV = $250,000, and AC = $230,000.
- CPI = EV / AC = 250,000 / 230,000 = 1.08 (Under budget)
- SPI = EV / PV = 250,000 / 200,000 = 1.25 (Ahead of schedule)
- EAC (Formula 1) = 500,000 / 1.08 = $462,962 (Projected to save ~$37,000)
Formula Derivation Walkthrough
Why does EAC = BAC / CPI give the same result as EAC = AC + (BAC − EV) / CPI? Here is the algebra:
EAC = AC + BAC/CPI − EV/CPI
Since CPI = EV/AC, it follows that EV/CPI = AC
EAC = AC + BAC/CPI − AC
EAC = BAC / CPI ✓