IET_APM_Midlands Network_Demystifying Earned - Value_B Sarani Edit.pdf

Demystifying Earned Value
Understanding Earned Value Management (EVM)
17th June 2025

Today’s speakers.
Behnam Sarani, ChPP, AtkinsRéalis
• Project Director
• Transportation
• APM ChPP Assessor
© 2024 Association for Project Management 2
Manish Khanna, FAPM, PMP, CEng, AtkinsRéalis
• Project Controls Manager
• Transportation
• Volunteer with APM, PMP, IET

Agenda
1. Introduction to Earned Value
Management (EVM)
2. Key Concepts and Terminology
3. Key Performance Indicators
4. Core Components of EVM
5. Calculating Earned Value
6. Benefits of Using EVM
7. Challenges
8. Quick Quiz

Aims of today

Introduction
• EVM combines scope, time, and cost to measure project performance
• Tracks actual progress vs planned progress
• Provides early warning on cost and schedule issues
• Enables data-driven decisions and forecasting
• Widely used in both public and private sector projects

Introduction - What is Earned Value?
• A measure of progress that expresses costs committed and work achieved in the
same units. (APM Glossary of Project Management Terms; Project management
Glossary | Terms used by project professional (apm.org.uk).
• A way to measure project progress using budgeted values
• Expresses work completed in £ terms
• Compares actual progress against the baselined plan
• Helps identify if you’re ahead/behind schedule or over/under budget
• Answers: “How much value have we earned for the money spent?

Introduction - Why Use Earned Value?
• Gives a quick*, structured snapshot of project progress
• Highlights if a project is on time and on budget
• Flags overspend or delays early so action can be taken
• Makes performance easy to track and communicate
• Supports resource planning and package-level control
• Widely used in work package management and formal reporting

Key Concepts and Terminology
There are various terms used in the calculation and interpretation of Earned Value. These are the
main ones you’ll come across:
PV (BCWS) – Planned Value (This is the Budgeted Cost of Work Scheduled)
The authorized budget assigned to the scheduled work
Calculated as Planned %age complete x budget.
EV (BCWP) – Earned Value (This is the Budgeted Cost of Work Performed).
The value of work actually preformed, expressed in terms of approved budget
Calculated as Actual %age complete x overall budget.
AC (ACWP) – Actual Cost (This is the Actual Cost of Work Performed)
The actual cost on the project (or Work Package) to date.
Cost Variance (CV) = EV – AC if CV is positive, we are under budget
Schedule Variance (SV) = EV – PV if SV is negative, we are behind schedule
Note: Accurate and consistent measurement of %age complete and actual cost is important
if we want to derive meaningful metrics

Key Performance Indicators
These measures can be used to produce some useful indicators.
CPI - Cost Performance Index
Derived by dividing EV by AC = EV/AC or BCWP/ ACWP
>1.00 means the project is under budget; <1.00 means the project is over budget.
SPI - Schedule Performance Index
Derived by dividing EV by PV or BCWP/ BCWS
>1.00 means the project is ahead of schedule; <1.00 means the project is behind schedule.
CPI and SPI allow for early identification of potential project overruns or delays.

Core Components of EVM
These are few of the structural and procedural elements to implement EVM effectively.
1. Work Breakdown Structure (WBS) – A hierarchical decomposition of the total scope of work to
accomplish project objectives
2. Integrated Baseline – Combines scope, schedule and cost baselines to measure performance
3. Performance Measurement Baseline (PMB) – The time phased budget plan against which
project performance is measured.
4. Data Collection and Reporting - Regular tracking of PV, EV, and AC to assess progress.
5. Forecasting - Using current data to predict future project outcomes (e.g., EAC, Estimate to
Complete).

Calculating Earned Value
Assume Project A with an overall budgeted cost (BC) of £75000
At this point, progress %age complete has been calculated as 10%. Actual cost has been recorded as £5000, and budgeted cost
at this point (BCWS) is £7000.
EV = 10% X 75000 = £7500
AC = £5000
PV = £7000
CV = EV-AC = 7500 – 5000 = £2500
SV = EV-PV = 7500 – 7000 = £ 500
CPI = EV/AC = 7500 / 5000 = 1.5
SPI = EV/ PV = 7500 / 7000 = 1.07
You can calculate ‘Estimate At Completion’ by diving project budget by the CPI = BC / CPI = £75000 / 1.5 = £50000
Hence, if you have a CPI of 1.5 your Estimate at Completion (EAC) is going to be under budget

Trend Curve
Over time, it can be extremely useful to monitor trends and understand how current project performance compares to planned
performance.
• Shows how project performance evolves over time
• Helps spot patterns, not just isolated issues
• Reveals if variances are short-term blips or ongoing trends
• Supports more accurate forecasting and planning

EV Trend Analysis
However, it is more helpful to understand
Earned Value trend as this could help to
predict problems

But…be Cautious
What’s needed:
• A baselined schedule and budget
• A consistent way to measure progress
• Accurate, timely data (not best guesses)
Common pitfalls:
• Relying on inconsistent or poor-quality inputs
• Misinterpreting metrics in isolation (e.g. CPI looks good, but SPI is tanking)
• Treating EVM as a “tick-box” or just a maths exercise
• Reporting progress based on optimism, not evidence

Challenges
• Requires accurate and timely data collection
• Needs robust baselines for both schedule and budget to produce meaningful results
• Can be complex to implement and maintain, especially on large or fast-moving projects
• Relies on consistent progress measurement and reliable data inputs
• May face resistance from teams unfamiliar with EVM or unsure how to use it
• Demands consistent application across all phases of the project to be effective

Benefits
• Provides an objective snapshot of both cost and schedule performance
• Key performance indicators like CPI and SPI enable early detection of potential overruns or delays
• Tracking trends in ACWP, BCWS, and BCWP helps predict issues before they escalate
• Helps identify resource inefficiencies and areas needing corrective action
• Trends show current project performance and also help forecast future risks, improving decision-
making
• Enhances communication among project stakeholders
• Improves overall project planning and control

Quick Quiz – Maths time ☺
• Project Budget: £100,000
• At halfway point:
• EV = £40,000
• AC = £60,000
Question:
• What’s your CPI?
• What does it tell you?

Quick Quiz - Myth or Fact?
1. If CPI > 1.0, your project is under budget
2. Earned Value (EV) is the same as Actual Cost (AC)
3. A Schedule Performance Index (SPI) of 0.8 means you’re ahead of schedule
4. Earned Value Management is only useful at the end of a project
5. The formula for CPI is: EV divided by AC
6. You can use EVM effectively without a baselined schedule
7. You can change the method of assessing % complete on a project without changing baseline

Quick Quiz – What would you do?
You’re reviewing a monthly report.
• CPI = 1.2 (under budget)
• SPI = 0.75 (significantly behind schedule)
Question: What would you do?
a) Celebrate the cost performance
b) Re-baseline the project
c) Investigate the delay and replan if needed

ISO Standard for Earned Value Management (EVM) - ISO 21508:2018
This standard provides guidance on the principles and practices of Earned Value
Management (EVM) within the context of project and programme management. It is applicable to any
organization—public or private, regardless of size or sector—and to any type of project or programme.
ISO 21508:2018 includes:
• Terms and definitions relevant to EVM.
• Purpose and benefits of using EVM.
• Integration of EVM with broader project or programme management practices.
• Process descriptions and an overview of EVM processes.
• Basic requirements for an EVM system.
• Guidance on using an EVM system effectively.
Title - Earned value management in project and programme management

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Project Controls in the 21st Century
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Thank you,
next steps
or any questions?
by Behnam Sarani & Manish Khanna
Project Director & Deputy HPPM & Project Controls Manager
Email@apm.org.uk

IET_APM_Midlands Network_Demystifying Earned - Value_B Sarani Edit.pdf

IET_APM_Midlands Network_Demystifying Earned - Value_B Sarani Edit.pdf

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