Understanding Earned Value Management
Earned Value Management (EVM) integrates scope, schedule, and cost into a single measurement framework. It compares three values at a status date: Planned Value (PV), the budgeted cost of work scheduled; Earned Value (EV), the budgeted cost of work actually performed; and Actual Cost (AC), what that work really cost. Everything else — variances, indices, and forecasts — is derived from those three numbers and the total budget (BAC).
Variances and Indices: Cost Variance (CV = EV − AC) and Schedule Variance (SV = EV − PV) express performance in dollars, where negative values are unfavorable. The Cost Performance Index (CPI = EV ÷ AC) and Schedule Performance Index (SPI = EV ÷ PV) express the same performance as efficiency ratios — a CPI of 0.90 means you're getting 90 cents of planned work for every dollar spent. Note that SPI naturally trends back toward 1.0 as a project finishes, even when it's late, so pair it with critical path analysis rather than reading it in isolation.
Forecasting with EAC: The Estimate at Completion answers "what will this project really cost?" The typical formula (BAC ÷ CPI) assumes current cost efficiency continues — the standard default. The atypical formula (AC + BAC − EV) assumes the variance to date was a one-time event and remaining work proceeds at budgeted cost. The combined formula factors in schedule pressure (CPI × SPI), producing the most conservative forecast when a project is both over budget and behind schedule. ETC (EAC − AC) is the money still needed; VAC (BAC − EAC) is the projected overrun or underrun.
TCPI — the reality check: The To-Complete Performance Index tells you the cost efficiency required on all remaining work to finish within a given budget. A TCPI to BAC above roughly 1.10 demands a substantial, sustained efficiency improvement that rarely materializes in practice. One subtlety worth knowing: the TCPI toward a BAC ÷ CPI-based EAC always equals your current CPI by construction, which is why this tool indexes against BAC — or against your own management EAC target — instead.
Related tools: Build your duration estimates with the PERT Calculator, and find the schedule baseline those estimates produce with the Critical Path Calculator — this tool then tracks execution against that baseline.