Learn the key earned value management formulas, including CPI, SPI, EAC, and ETC, with practical examples and a 6-step workflow for tracking project cost and sc
11 May 2026
Taro
TL;DR: Most EVM formula guides hand you the equations without telling you what to do when the numbers look wrong. This one pairs each formula with a concrete interpretation rule and a decision you can act on the same day. You'll also get a six-step application workflow built for IT project managers running real budgets and real deadlines.
Earned value management measures project performance by comparing what you planned to spend, what you actually spent, and what you actually accomplished. Those three inputs sit at the center of every earned value management formula you'll run.
The three core EVM metrics are:
Planned Value (PV): the budgeted cost of work scheduled through a given date
Earned Value (EV): the budgeted cost of work actually completed by that date
Actual Cost (AC): what you genuinely spent to complete that work
Most IT project managers track cost and schedule as separate reports. The problem is that a project can be on budget and still be behind schedule, or on time while quietly overspending. Tracking PV, EV, and AC together closes that gap. If EV is lower than PV, you're behind schedule. If AC is higher than EV, you're over budget. Both conditions can be true at once, and you won't see that in a cost report alone.
This is why earned value analysis in project management treats the three inputs as a system, not three separate figures. Every derived metric, from the cost performance index to schedule variance, is just a ratio or difference built on PV, EV, and AC. Get those three numbers right, and the rest of the formulas follow cleanly.
Seven metrics do most of the work in EVM. Here is what each one measures and what it tells you when the number comes back wrong.
Planned Value (PV) is the budgeted cost of work scheduled by a given date. If your project plan says 40% of work should be done by week six, PV is 40% of the total budget. It is your baseline expectation, nothing more.
Earned Value (EV) is the budgeted cost of work actually completed. If that same 40% plan only produced 30% of deliverables, EV reflects 30%. The gap between EV and PV is where schedule problems first appear. For a deeper look at how this plays out across a project lifecycle, earned value analysis in project management walks through the mechanics.
Actual Cost (AC) is what you have genuinely spent to produce that EV. No adjustments, no allocations — just real expenditure.
Schedule Variance (SV) equals EV minus PV. A negative result means you are behind schedule. On a $200,000 project where EV is $80,000 and PV is $100,000, SV is -$20,000. You have delivered $20,000 less work than planned.
Cost Variance (CV) equals EV minus AC. Negative means overspent. Using the same project: if AC is $95,000 against EV of $80,000, CV is -$15,000. You paid $15,000 more than the work you completed was worth.
The schedule performance index (SPI) divides EV by PV. An SPI of 0.80 means you are completing 80 cents of planned work for every dollar of scheduled progress. Below 1.0 is a warning; below 0.85 on an IT project typically signals the schedule needs a formal replan.
The cost performance index (CPI) divides EV by AC. A CPI of 0.84 means you are getting 84 cents of value for every dollar spent. CPI is the single most watched EVM metric because it predicts final cost overrun more reliably than any other indicator.
Finally, Budget at Completion (BAC) is the total approved budget for the project. Every forecasting formula — estimate at completion, estimate to complete, and TCPI — uses BAC as its anchor. If BAC changes, every downstream forecast changes with it.
Teams that track project budget, dates, and status in one place catch CPI and SPI drift early enough to act on it, rather than discovering the gap at the monthly review.
The eight formulas below form the complete earned value formula set. Each row gives you the calculation, what the result means, and the threshold that should prompt action.
Formula | Calculation | Interpretation | Action threshold |
|---|---|---|---|
Earned Value (EV) | % complete × BAC | Work completed in dollar terms | Baseline for every other formula |
Cost Variance (CV) | EV − AC | Positive = under budget; negative = over | CV below 0: investigate cause before next reporting cycle |
Schedule Variance (SV) | EV − PV | Positive = ahead of plan; negative = behind | SV below 0: check whether delay compounds downstream tasks |
Cost Performance Index (CPI) | EV ÷ AC | Dollars of work delivered per dollar spent | CPI below 1.0: you are overspending per unit of work completed |
Schedule Performance Index (SPI) | EV ÷ PV | Work delivered per unit of time planned | SPI below 1.0: delivery is slower than planned |
Estimate at Completion (EAC) | BAC ÷ CPI | Projected final cost at current efficiency | Rising EAC signals a budget reforecast conversation with stakeholders |
Estimate to Complete (ETC) | EAC − AC | Remaining cost to finish the project | Use ETC to update procurement and resource plans, not just reports |
TCPI (based on BAC) | (BAC − EV) ÷ (BAC − AC) | Efficiency needed on remaining work to hit original budget | TCPI above 1.2 means the original budget is practically unreachable |
A few notes on applying these in practice.
CPI is the most reliable single indicator for project cost tracking. Once CPI drops below 0.9 on an IT project, most teams find it rarely recovers above 1.0 without a scope change or a budget revision. Use that as your early-warning line, not just the 1.0 floor.
TCPI has two variants. The BAC-based version (shown above) answers "can we still hit the original budget?" The EAC-based version, (BAC − EV) ÷ (EAC − AC), answers "can we hit our revised budget?" Use the BAC variant first. If TCPI exceeds 1.2, switch to the EAC variant and present that to stakeholders instead, since the original number is no longer a useful target.
EAC and ETC are where the earned value formula set connects directly to budget decisions. The next section covers that in full, including a scenario where a mid-project CPI feeds a revised number a stakeholder can act on.
For a deeper look at how these outputs connect to variance analysis, earned value analysis in project management covers the diagnostic layer. To identify where schedule variance is building up across tasks, you need visibility at the work level, not just the summary
EVM formulas give project budgeting a concrete foundation that gut-feel revisions never can.
The two formulas that matter most at mid-project are Estimate at Completion (EAC) and Estimate to Complete (ETC). EAC tells you the most likely final cost given current performance. ETC tells you how much budget remains to finish the work. Together, they replace "I think we're over budget" with a number a stakeholder can act on.
Here is a short scenario. Your project has a Budget at Completion (BAC) of $200,000. At the halfway mark, your CPI is 0.80, meaning you are spending $1.25 for every dollar of work completed. Applying the standard EAC formula (BAC ÷ CPI) gives a revised forecast of $250,000. That is a $50,000 gap your sponsor needs to see now, not at project close. ETC is simply EAC minus Actual Cost, so if you have spent $110,000, you need $140,000 more to finish.
This is where earned value analysis in project management shifts from a reporting exercise to a decision tool. The CPI feeds the re-forecast, the re-forecast triggers a budget conversation, and that conversation happens early enough to matter.
For project cost tracking to work this way, your actual cost and task completion data must be current. Stale inputs produce a confident-looking forecast that is simply wrong.
Set the performance measurement baseline: Define your Budget at Completion (BAC) and break it into time-phased planned value (PV) for each deliverable. This baseline is the reference point every subsequent formula depends on. Without it, your EVM metrics are arithmetic without meaning.
Record actual cost: Capture all costs incurred to date: labor, contractor fees, software licenses, and any overhead your accounting system allocates to the project. Incomplete AC is the most common reason EVM outputs mislead — a point the next section covers in detail.
Calculate earned value from completed work: Multiply BAC by the percentage of work physically complete. If your team has finished 40% of a $200,000 project, EV = $80,000. Use completion criteria defined upfront, not time elapsed.
Run the variance and performance formulas: Calculate cost variance (CV = EV − AC), schedule variance (SV = EV − PV), cost performance index (CPI = EV ÷ AC), and schedule performance index (SPI = EV ÷ PV). These four numbers tell you where you stand right now.
Interpret outputs against decision thresholds: A CPI below 0.9 on an IT project typically signals a structural cost problem, not a one-period anomaly — PMI's guidance treats sustained CPI below 1.0 as a trigger for corrective action. SPI below 0.9 warrants a schedule review. Numbers between 0.9 and 1.1 are generally acceptable; above 1.1 may indicate scope was underplanned.
Update the forecast: Feed your current CPI into EAC and ETC to produce a data-backed revised budget, as covered in the previous section on earned value analysis in project management.
Taro keeps task status, budget, and dates in one place, so when you reach step 4, the inputs are already
Three errors account for most unreliable earned value formula outputs.
First, teams set PV using planned hours instead of planned cost. Hours don't convert directly to budget, so every downstream calculation drifts from the start.
Second, EV gets measured by time elapsed rather than work actually completed. A task that's 60% through its scheduled window isn't 60% done.
Third, AC gets updated without capturing all cost categories — subcontractors, software licenses, and overhead often get logged late, which distorts the cost performance index before anyone notices.
Each mistake is a data quality problem, not a math problem. Clean inputs are the fix.
Earned value management only tells you the truth when the numbers feeding it are current. CPI drifts from useful to decorative the moment your cost data is two weeks stale. The formulas themselves are straightforward — the hard part has always been keeping the inputs honest.
The six steps covered here give you a repeatable structure: establish your baseline, track actual costs, measure physical progress, calculate the core variances and performance indexes, forecast completion, and act on what the numbers say. Each step depends on the one before it, which means a gap in your task completion data or time tracking creates a gap in every downstream calculation.
That's exactly where Lio's Taro agent earns its place. Project budgets, task completion status, and time tracking already live together inside Taro — so every EVM input is current by default, not by effort. Run your first EVM report without the spreadsheet
Q. What is the formula for calculating earned value?
A. Earned value equals the percentage of work completed multiplied by the total budget: EV = % Complete × BAC. If your budget is $100,000 and you've finished 40% of scope, your EV is $40,000, regardless of what you've spent.
Q. What are the key metrics in EVM?
A. The three baselines are Planned Value (PV), Earned Value (EV), and Actual Cost (AC). From those, you derive Cost Variance (CV), Schedule Variance (SV), Cost Performance Index (CPI), and Schedule Performance Index (SPI). Every forecast formula, including Estimate at Completion, builds on these six numbers.
Q. How do I apply EVM formulas to my project?
A. Set your PV, EV, and AC baselines at kickoff. Then run CV, SV, CPI, and SPI at each reporting cycle, not just at the end, so variances surface early enough to act on.
Q. Can EVM formulas help with budgeting?
A. Yes. CPI (EV ÷ AC) shows how much value you're getting per dollar spent, which is more actionable than a simple budget-vs-actual comparison because it accounts for whether the work was actually done.
Q. What does a CPI below 1.0 mean?
A. It means you're overspending relative to work completed. A CPI of 0.85 means every budgeted dollar is costing you $1.18 in reality. The earlier you catch it, the more recovery options you have.
Q. What is the difference between EAC and ETC?
A. EAC is the projected total cost at project completion. ETC is what remains from today forward: ETC = EAC minus AC. If you've spent $40K and your EAC is $120K, you still need to budget $80K.
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