3.2 Earned Value Management (EVM) & Forecasting

🎯 Key PMI PMP® Exam Takeaways

• Every variance formula starts with EV: CV = EV - AC (cost) and SV = EV - PV (schedule). Negative is unfavorable.
• Every performance index starts with EV on top: CPI = EV / AC and SPI = EV / PV. Values < 1.0 indicate inefficiencies.
• CPI is the single best predictor of final project cost performance.
• When historical cost variances are expected to continue, EAC = BAC / CPI.
• TCPI > 1.10 indicates remaining budget feasibility is highly improbable, requiring negotiation of an updated EAC.

Earned Value Management (EVM) integrates scope, schedule, and cost into a unified quantitative performance measurement framework. EVM compares the value of physical work planned (Planned Value, PV), the value of work actually completed (Earned Value, EV), and the actual funds spent (Actual Cost, AC).

Performance is evaluated through variances and efficiency indices. Cost Variance (CV = EV - AC) reveals whether the project is over or under budget, while Schedule Variance (SV = EV - PV) reveals schedule alignment. The Cost Performance Index (CPI = EV / AC) reflects cost efficiency (e.g. CPI of 0.85 means earning $0.85 of deliverable value for every dollar spent), while the Schedule Performance Index (SPI = EV / PV) reflects schedule velocity.

Project managers use EVM indices to forecast final financial outcomes. If past cost variances are typical and expected to persist, the Estimate at Completion is calculated as EAC = BAC / CPI. The To-Complete Performance Index (TCPI) calculates the cost efficiency required for remaining work to hit budget goals.

⚠️ Common PMI Exam Traps

• Inverting variance formulas (subtracting EV from AC or PV); always start with EV.
• Assuming an SPI of 1.0 at project closeout means the project finished on time; SPI always converges to 1.0 when all work is completed, even if delayed.