Earned Value Management explained in five minutes
Most project status reports answer one question: how much have we spent? That is useful, but it says nothing about whether the money bought the progress it should have. Earned Value Management (EVM) closes that gap by comparing three numbers.
The three numbers
- Planned Value (PV) — the budgeted value of the work you planned to have done by now.
- Earned Value (EV) — the budgeted value of the work you have actually completed.
- Actual Cost (AC) — what that completed work actually cost.
A simple example
A project has a budget of 1,000,000 kr over ten sprints. After four sprints the plan said 40% should be done, so PV = 400,000 kr. In reality 30% is done, so EV = 300,000 kr. The team has spent AC = 360,000 kr.
Looking only at spend (360,000 of 1,000,000), the project seems fine. EVM tells a different story.
Two indices that tell the truth
- Schedule Performance Index (SPI) = EV / PV = 0.75. You are delivering 75% of the planned pace.
- Cost Performance Index (CPI) = EV / AC = 0.83. Every krone buys 83 øre of planned value.
Both below 1.0 means the project is behind and over budget — something a spend-only report would have hidden.
Forecasting the finish
If performance continues, the Estimate at Completion (EAC) is roughly budget / CPI: 1,000,000 / 0.83 ≈ 1,200,000 kr. That is a number a steering committee can act on today, not at the end of the project.
Getting started
You do not need a heavy toolchain. You need a baseline, a way to measure completion consistently (for example, done user stories per sprint) and actual cost from your time registration. Project Tracker is built to do exactly that — or book a demo and we will show you with your own numbers.