Portfolio Guide · Chapter 02

Earned Value Management (EVM)

EVM fundamentals to AS 4817 — Performance Measurement Baseline, PV/EV/AC, SPI/CPI indices, EAC/ETC/VAC/TCPI forecasting, and how to set up an EVM-compliant project.

Portfolio & EVM Guide Chapter 02 of 5
00Overview 01Introduction 02Earned Value Management 03PMI / MoP / P3O 04Portfolio Governance 05Reporting & Forecasting
Performance Measurement

Earned Value Management (EVM)

Earned Value Management is a project performance technique that integrates scope, schedule, and cost into a single objective measure of progress. It is mandated on US federal projects above defined thresholds and is widely used on major Australian infrastructure under PMI and the Australian Standard AS 4817:2006 — Project Performance Measurement using Earned Value.

EVM produces forward-looking forecasts (Estimate at Completion, EAC) that don't rely on contractor optimism, and gives an objective answer to the question 'is this project on track?' that traditional cost or schedule reports can't.

Performance Measurement Baseline (PMB)

EVM begins with a baseline. The Performance Measurement Baseline is the time-phased budget (cost loaded against the schedule) that becomes the reference against which actual progress is measured. It is locked at project commencement and re-baselined only with formal change control.

The three core EVM measures

PV — Planned Value: the budgeted cost of work scheduled to be done by a given date. Comes from the time-phased PMB.

EV — Earned Value: the budgeted cost of work actually completed by that date. This is the heart of EVM — measuring progress in dollars rather than percentage complete.

AC — Actual Cost: the actual cost of work completed by that date. From cost system data.

The four derived indices

SPI — Schedule Performance Index = EV / PV. SPI < 1 means the project is behind schedule (in dollar terms). SPI = 1.00 means on schedule.

CPI — Cost Performance Index = EV / AC. CPI < 1 means the project is over budget. CPI = 1.00 means on budget.

EAC — Estimate at Completion = BAC / CPI (most common formula). The forecast total cost of the project based on current performance trend.

TCPI — To-Complete Performance Index = (BAC − EV) / (BAC − AC). The CPI required for the remainder of the project to land on the original BAC. If TCPI is materially higher than the current CPI, the original BAC is no longer achievable without intervention.

Why EVM beats traditional reporting

Traditional cost reporting compares actuals against budget. Traditional schedule reporting compares progress against baseline programme. Neither alone tells the full story. EVM integrates the two and produces objective forecasts that are recognised, recognisable, and defensible at executive and lender level.

Common Questions

Frequently Asked Questions

What is the Australian Standard for EVM?

AS 4817:2006 — Project Performance Measurement using Earned Value. It defines the conventions, terminology, and minimum implementation requirements for EVM in Australia. Cenex's EVM implementations comply with AS 4817 conventions and use the supporting documentation that auditors and lenders expect.

What's the difference between SPI and CPI?

SPI (Schedule Performance Index) measures schedule performance in dollar terms — EV ÷ PV. CPI (Cost Performance Index) measures cost performance — EV ÷ AC. Both equal 1.00 means perfectly on track. Below 1.00 means underperforming; above 1.00 means outperforming. Reporting both alongside each EAC forecast gives the complete picture.

Can EVM be applied to small or simple projects?

Yes, but the overhead has to match the project size. For small projects (under ~$5M), simplified EVM with weekly progress measurement against a high-level PMB delivers most of the benefit. For major projects (above ~$50M), full EVM with control accounts and earned value techniques per AS 4817 is appropriate.

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