The three base values
- Planned value (PV): the budget for the work that should be done by now, according to the plan.
- Earned value (EV): the budget for the work that is done: each task's budget × its percent complete.
- Actual cost (AC): what has really been spent so far.
The whole project budget is the budget at completion (BAC), here $240,000. Why do you need EV at all? Because comparing AC with PV says nothing on its own. Spending less than planned could mean savings, or simply that the work is late. EV is the bridge between the two.
Step 1: earned value from the task list
Multiply each task's budget by its percent complete: =B2*C2. Design is finished ($40,000 earned), Build is 60% done ($72,000), Test 16% ($8,000), Rollout not started. EV = $120,000, which is 50% of the budget. By the plan, $130,000 of work should be done by the end of week 8, and the project has spent $135,000.
Worked example: an IT project at the end of week 8
The task list gives EV. PV comes from the baseline plan and AC from the accounting system. Everything else is a formula.
| A | B | C | D | |
|---|---|---|---|---|
| 1 | Task | Budget | % complete | Earned value |
| 2 | Design | 40,000 | 100% | 40,000 |
| 3 | Build | 120,000 | 60% | 72,000 |
| 4 | Test | 50,000 | 16% | 8,000 |
| 5 | Rollout | 30,000 | 0% | 0 |
| 6 | Total (BAC) | 240,000 | 50% | 120,000 |
| 7 | ||||
| 8 | Status at the end of week 8 | Value | ||
| 9 | Planned value (PV) | 130,000 | ||
| 10 | Actual cost (AC) | 135,000 | ||
| 11 | Earned value (EV) | 120,000 | ||
| 12 | Cost variance CV = EV − AC | -15,000 | ||
| 13 | Schedule variance SV = EV − PV | -10,000 | ||
| 14 | CPI = EV / AC | 0.889 | ||
| 15 | SPI = EV / PV | 0.923 | ||
| 16 | EAC = BAC / CPI | 270,000 | ||
| 17 | ETC = EAC − AC | 135,000 | ||
| 18 | VAC = BAC − EAC | -30,000 | ||
| 19 | TCPI = (BAC − EV) / (BAC − AC) | 1.143 | ||
| 20 | EAC if the overrun was a one-off | 255,000 | ||
| 21 | EAC with cost and schedule pressure | 281,250 |
- D2
=B2*C2Earned value per task - B14
=B11/B10CPI - B15
=B11/B9SPI - B16
=B6/B14Typical EAC - B19
=(B6-B11)/(B6-B10)TCPI - B21
=B10+(B6-B11)/(B14*B15)EAC with CPI × SPI
Step 2: variances
- Cost variance CV = EV − AC = -$15,000. Negative means over budget: the work done should have cost $120,000 but cost $135,000.
- Schedule variance SV = EV − PV = -$10,000. Negative means behind schedule: $10,000 worth of planned work is not done yet.
Step 3: performance indices
- CPI = EV ÷ AC = 0.889. For every dollar spent, the project gets 89 cents of planned work.
- SPI = EV ÷ PV = 0.923. Work is progressing at 92% of the planned pace.
Both below 1 means the project is over budget and behind schedule. Indices are easier to compare than variances, because they do not depend on the project's size.
Step 4: forecasts
If the cost efficiency so far continues, the whole budget will be spent at the same rate: EAC (estimate at completion) = BAC ÷ CPI = $240,000 ÷ 0.8889 = $270,000. Then:
- ETC (estimate to complete) = EAC − AC = $135,000 still needed.
- VAC (variance at completion) = BAC − EAC = -$30,000, the forecast overrun.
- TCPI (to-complete performance index) = (BAC − EV) ÷ (BAC − AC) = 1.143. To still finish on the original budget, the remaining work would have to be done at 1.14 dollars of work per dollar spent, far better than the 0.89 achieved so far. A TCPI that high is rarely realistic, so it is time to ask for more budget rather than promise a turnaround.
Setting up EVM in Excel
Keep three blocks. A task list with budget and percent complete gives EV. A status block holds PV from the approved baseline and AC from the accounting system, both for the same cut-off date. A results block calculates the variances, indices and forecasts with short formulas that point to those cells. Copy the status block once per reporting period and you get a history of CPI and SPI. A line chart of both indices over time shows whether a project is recovering or sliding further.
Choosing the right EAC
BAC ÷ CPI is the default, but the right forecast depends on why the project is over budget. If the overrun came from a one-off problem that will not repeat, the rest of the work should cost what was planned: EAC = AC + (BAC − EV) = $255,000. If cost and schedule pressure will both continue, for example because catching up needs overtime, use EAC = AC + (BAC − EV) ÷ (CPI × SPI) = $281,250. Showing all three gives stakeholders an honest range: here from $255,000 to $281,250.
Common mistakes
- Using AC − PV as the cost variance. It mixes cost and schedule. Cost variance is always EV − AC.
- Optimistic percent complete. EV is only as good as the progress estimates. Many teams use rules such as 0/100 (no credit until done) or 50/50 for short tasks to avoid "90% done" for weeks.
- Mixing up the order in the indices. Both have EV on top: CPI = EV ÷ AC, SPI = EV ÷ PV. Upside down, the meaning flips.
- Taking PV from the current plan instead of the approved baseline. Re-planning every month hides the variances.
- Reading SPI late in the project. At the end EV always equals PV, so SPI drifts back to 1 even when the project is late. Compare dates as well.
Frequently asked questions
What is the difference between PV and EV?
Planned value is the budget for the work scheduled to be done by now. Earned value is the budget for the work actually completed. The difference between them is the schedule variance.
What does a CPI of 0.89 mean?
For every dollar spent, the project has completed 89 cents of budgeted work. A CPI below 1 means the project is over budget for the work done so far.
Which EAC formula should I use?
BAC ÷ CPI if current cost performance is expected to continue, AC + (BAC − EV) if the overrun was a one-off, and AC + (BAC − EV) ÷ (CPI × SPI) if both cost and schedule problems will affect the remaining work.
What is a good TCPI?
Close to 1 or below. A TCPI clearly above the CPI achieved so far means the remaining work would have to be done much more efficiently than the past work, which rarely happens.