Earned Value Management (EVM)

4 months ago
Ashley
3 minutes

Earned Value Management (EVM): Key Equations

Introduction

Earned Value Management (EVM) is a project management methodology that integrates scope, time, and cost to assess project performance and progress. For Quantity Surveyors, mastering EVM techniques and equations is vital for effective cost control and forecasting in projects. The approach not only measures current performance but also enables proactive decision-making to mitigate risks and manage project budgets effectively.

The Association for Project Management (APM) guidelines outline several core EVM equations that professionals can use to calculate critical metrics. By understanding and applying these equations, Quantity Surveyors can provide valuable insights to stakeholders and ensure that projects remain on track both financially and in terms of deliverables.

Overview of Key EVM Equations

EVM equations are designed to track project performance by comparing planned work against actual performance and the corresponding costs. Here are the essential components and equations as per APM guidelines:

  1. Planned Value (PV)
    • PV = Budgeted Cost of Work Scheduled (BCWS)
    • Definition: The value of work planned to be completed by a specific date, based on the project’s baseline schedule.
  2. Earned Value (EV)
    • EV = Budgeted Cost of Work Performed (BCWP)
    • Definition: The value of work actually completed by a specific date, expressed in monetary terms.
  3. Actual Cost (AC)
    • AC = Actual Cost of Work Performed (ACWP)
    • Definition: The total cost incurred for the work completed by a specific date.
  4. Cost Variance (CV)
    • CV = BCWP – ACWP
    • Definition: The difference between the earned value and actual costs. Positive CV indicates cost efficiency.
  5. Cost Variance Percentage (CV%)
    • CV% = (CV / BCWP) × 100
    • Definition: The percentage difference between the earned value and actual costs, providing a relative measure of cost efficiency.
  6. Schedule Variance (SV)
    • SV = BCWP – BCWS
    • Definition: The difference between the earned value and planned value. Positive SV indicates schedule efficiency.
  7. Schedule Variance Percentage (SV%)
    • SV% = (SV / BCWS) × 100
    • Definition: The percentage difference between earned value and planned value, indicating relative schedule performance.
  8. Cost Performance Index (CPI)
    • CPI = EV / AC
    • Definition: A measure of cost efficiency. CPI > 1 indicates that the project is under budget.
  9. Schedule Performance Index (SPI)
    • SPI = BCWP / BCWS
    • Definition: A measure of schedule efficiency. SPI > 1 indicates the project is ahead of schedule.
  10. Estimate at Completion (EAC)
    • EAC = ACWP+ETC
    • EAC = BAC / CPI
    • Definition: The forecasted total cost of completing the project based on current performance.
  11. Estimate to Completion (ETC)
    • ETC = BAC-BCWP/CPI
    • ETC = EAC – AC
    • Definition: The estimated cost required to complete the remaining work.
  12. Variance at Completion (VAC)
    • VAC = BAC – EAC
    • Definition: The expected cost variance at project completion. Positive VAC indicates a budget surplus.
  13. To-Complete Performance Index (TCPI)
    • TCPI = (BAC – EV) / (BAC – AC)
    • Definition: The cost performance required to achieve the remaining work within the budget.
  14. Percentage Spent
    • Percentage Spent = (AC / BAC) × 100
    • Definition: The percentage of the total budget spent to date.
  15. Percentage Complete
    • Percentage Complete = (EV / BAC) × 100
    • Definition: The percentage of total work completed to date.

Conclusion

By incorporating EVM equations into their workflow, Quantity Surveyors can enhance their ability to monitor and control project performance. These metrics provide a clear picture of where a project stands in terms of cost and schedule, enabling timely interventions and adjustments. Whether you’re managing large-scale construction projects or smaller refurbishments, EVM equips you with the tools to deliver successful outcomes aligned with client expectations and financial targets.