What is Earned Value Analysis?
Earned Value Analysis (EVA) -- also known as Earned Value Management (EVM) or Earned Value Analysis -- is the most powerful method in project controlling. It simultaneously answers the three crucial questions of every project: Are we on budget? Are we on schedule? How much have we actually accomplished?
Unlike a simple planned vs. actual cost comparison, EVA integrates the project scope, costs, and schedule into a single view. It doesn't just show that you spent 60,000 euros, but also whether you created 60,000 euros worth of value for it -- or only 40,000 euros.
Earned Value Analysis was developed in the 1960s by the US Department of Defense and is now a core part of the PMBOK Guide (PMI), DIN 69901, and ISO 21508. It is used especially in large projects, public tenders, and regulated industries -- but is also useful for medium-sized projects with budgets from around 50,000 euros.
The Three Basic Metrics: PV, EV, AC
The entire Earned Value Analysis is built on just three basic metrics. If you understand these, you understand EVA:
Planned Value
The planned value: How much budget should have been spent according to the plan by the status date? Also called "Budgeted Cost of Work Scheduled" (BCWS).
Earned Value
The earned value: How much value (measured by budget) was actually completed? Also called "Budgeted Cost of Work Performed" (BCWP).
Actual Cost
The actual costs: How much money was actually spent by the status date? Also called "Actual Cost of Work Performed" (ACWP).
Mnemonic: PV = What was planned? EV = What was accomplished? AC = What did it cost? Comparing these three values immediately shows if your project is on track.
A crucial point: Earned Value (EV) measures progress in euros, not in percent. If a work package is budgeted at 10,000 euros and is 50% complete, the EV is 5,000 euros -- regardless of how much was actually spent.
Earned Value Analysis — S-Curves Visualized
Comparison of Planned Value (PV), Earned Value (EV), and Actual Cost (AC) for project control.
EVM chart: The project is behind schedule (SV negative) and over budget (CV negative). PathHub AI calculates these KPIs automatically.
Calculating Variances: CV and SV
The cost and schedule variances can be calculated from the three basic metrics:
The Cost Variance (CV) compares what was accomplished (EV) with what it cost (AC). If you created 50,000 euros worth of value but spent 60,000 euros, the CV is -10,000 euros -- you are 10,000 euros over budget.
The Schedule Variance (SV) compares what was accomplished (EV) with what should have been accomplished according to the plan (PV). If you created 50,000 euros worth of value, but according to the plan you should have accomplished 70,000 euros, the SV is -20,000 euros -- you are behind schedule.
Performance Indices: CPI and SPI
While CV and SV show absolute variances, CPI and SPI express efficiency as a ratio -- ideal for comparing projects of different sizes:
| Metric | Formula | Meaning if < 1.0 | Meaning if = 1.0 | Meaning if > 1.0 |
|---|---|---|---|---|
| CPI | EV / AC | Over Budget | On Budget | Under Budget |
| SPI | EV / PV | Behind Schedule | On Schedule | Ahead of Schedule |
Studies show that the CPI hardly improves after the 20% mark of a project. If your CPI is below 0.8 after the first fifth of the project, the budget will very likely be significantly exceeded. The earlier you intervene, the better.
Forecasts: EAC and ETC
The most powerful function of EVA: You can forecast what the project will cost at completion based on the performance to date:
There are different EAC formulas, depending on the assumption about future performance. The formula above (BAC / CPI) assumes that the current cost efficiency will continue -- the most realistic assumption in most cases.
Practical Example: Software Project
A company is developing a new web application. The project has a total budget (BAC) of 200,000 euros and a planned duration of 20 weeks. After 10 weeks (midpoint), an EVA is performed:
| Work Package | Budget (PV) | Completion | Earned Value (EV) | Actual Cost (AC) |
|---|---|---|---|---|
| Requirements Analysis | 20,000 € | 100 % | 20,000 € | 22,000 € |
| UI/UX Design | 30,000 € | 100 % | 30,000 € | 28,000 € |
| Backend Development | 40,000 € | 75 % | 30,000 € | 38,000 € |
| Frontend Development | 30,000 € | 50 % | 15,000 € | 18,000 € |
| Testing | 10,000 € | 20 % | 2,000 € | 3,000 € |
| Total after 10 weeks | 130,000 € | 97,000 € | 109,000 € |
Calculating the Metrics
SV = 97,000 - 130,000 = -33,000 € The project is 12,000 euros over budget and 33,000 euros behind schedule.
SPI = 97,000 / 130,000 = 0.75 For every euro spent, only 89 cents of value are generated. Only 75% of the planned work is completed.
ETC = 224,719 - 109,000 = 115,719 €
VAC = 200,000 - 224,719 = -24,719 € If efficiency remains constant, the project will cost approximately 25,000 euros more than planned.
Interpreting Results: The Four Scenarios
The combination of CPI and SPI results in four possible scenarios. Each requires a different response:
| Scenario | CPI | SPI | Meaning | Actions |
|---|---|---|---|---|
| Ideal Project | > 1.0 | > 1.0 | Under budget and ahead of schedule | Stay the course, potentially release resources for other projects |
| Schedule Pressure | > 1.0 | < 1.0 | Under budget, but behind schedule | Invest surplus budget in additional resources to catch up |
| Cost Pressure | < 1.0 | > 1.0 | Over budget, but ahead of schedule | Review efficiency, reduce scope, or use cheaper resources |
| Crisis Project | < 1.0 | < 1.0 | Over budget and behind schedule | Immediate escalation, scope reduction, create a recovery plan |
Our example project (CPI = 0.89, SPI = 0.75) falls into the "Crisis Project" scenario. The project manager should act immediately: analyze the causes of inefficiency, review the scope (can features be cut?), evaluate additional resources, and inform the stakeholders about the situation.
Prerequisites and Limitations of EVM
Prerequisites for Successful EVM
- Clear Project Scope: A Work Breakdown Structure (WBS) is the foundation. Without clearly defined work packages, no Earned Value can be calculated.
- Budget per Work Package: Each work package must have an assigned budget. The sum of all package budgets equals the BAC.
- Measurable Progress: The completion status of each work package must be objectively measurable (e.g., 0/50/100 method, milestone method, or percentage estimation).
- Current Cost Data: Actual costs must be recorded promptly and per work package.
- Baseline (Planned Values): The approved project plan serves as the reference. Changes to scope require a new baseline.
Limitations of EVM
- Not Optimized for Agile Projects: In Scrum or Kanban, scope and priorities change continuously. EVM works best with a clearly defined scope.
- SPI Loses Significance Towards Project End: The SPI always converges towards 1.0, even if the project finishes late (because EV approaches PV).
- Quality is Not Measured: EVM shows if you are on budget and schedule -- not if the result is good.
- Effort for Data Collection: EVM requires disciplined time tracking and progress reporting. Without clean data, the results are worthless.
For work packages whose progress is difficult to estimate, the 0/50/100 method is suitable: a package is either not started (0%), in progress (50%), or completed (100%). This is simpler than an exact percentage and prevents unrealistic "90% complete" estimates that remain at 90% for weeks.