Project Cost Control and Earned Value Management - Examples & Applications

Earned Value Management Applications

Examples of calculating variances, indices, and forecasting completion costs.

Example 1: Basic EVM Calculation (Variances and Indices)

Determining project health using SV, CV, SPI, and CPI.

A construction project has a total original baseline budget of

\

100,000

. At the end of month 3, the project manager reviews the status. According to the baseline schedule,

40%

of the work should have been completed by today. However, a physical site inspection reveals that only

35%

of the work has actually been completed. The accounting department reports that

$40,000$ has been paid out so far.

Calculate the Schedule Variance (SV), Cost Variance (CV), Schedule Performance Index (SPI), and Cost Performance Index (CPI).

Step-by-Step Solution

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Example 2: Forecasting Completion Costs (EAC and ETC)

Calculating the Estimate at Completion and Estimate to Complete for an underperforming project.

\

500,000

baseline budget highway project (Budget at Completion, BAC =

$500,000

) has reached its midway milestone. The project manager's EVM report shows an Earned Value (EV) of

$200,000

, but the Actual Costs (AC) incurred to achieve that value are

$250,000$.

Assuming the current cost performance inefficiencies will continue unchanged for the remainder of the project, calculate the Estimate at Completion (EAC) and the Estimate to Complete (ETC).

Step-by-Step Solution

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Example 3: EVM for an Over-Performing Project

Calculating variances and forecasts for a project that is ahead of schedule and under budget.

A software development project has a total budget of

\

120,000

(BAC). At the current milestone, the project was scheduled to have earned

$60,000

in value (PV). However, the team has completed work valued at

$75,000

(EV), and their actual recorded costs to date are only

$65,000$ (AC).

Calculate the Cost Variance (CV), Schedule Variance (SV), and the new Estimate at Completion (EAC) assuming this positive performance rate continues.

Step-by-Step Solution

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Example 4: To-Complete Performance Index (TCPI)

Calculating the required efficiency level needed to meet the original budget goal after poor initial performance.

A project has a BAC of

\

80,000

. Currently, the Earned Value (EV) is

$30,000

and the Actual Cost (AC) is

$40,000

. The project manager is told that no more funds will be approved, meaning the team *must* finish the project within the original

$80,000$ budget.

Calculate the To-Complete Performance Index (TCPI) based on the original BAC.

Step-by-Step Solution

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Key Takeaways

The core indices provide a snapshot of health: SPI and CPI less than $1.0$ indicate the project is falling behind or burning cash too fast.
Estimating final project costs (EAC) uses the current CPI to extrapolate future spending efficiency mathematically.
Estimate to Complete (ETC) determines exactly how much new capital is required to finish the project from the current status date forward.
The To-Complete Performance Index (TCPI) is a goal-seeking metric, showing management exactly how efficient the team must be to recover from past losses and hit the original budget.

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