Report on Earned Value Management in Project Management Practices

This report provides an overview of Earned Value Management (EVM), a strategy used to determine project performance against a baseline. It details the three dimensions of EVM: Earned Value (EV), Planned Value (PV), and Actual Cost (AC), explaining how each contributes to project assessment. The report also discusses key components like Schedule Variance (SV), Schedule Performance Index (SPI), Cost Variance (CV), and Cost Performance Index (CPI), highlighting their importance in evaluating project progress and financial health. It further explains how EVM integrates project work, cost, and schedule using a work breakdown structure, and how combining CPI and SPI helps estimate the Estimate at Completion (EAC). The report concludes by emphasizing the significant role of earned value analysis in measuring project performance and facilitating informed decision-making.

Running head: PROJECT MANAGEMENT 1
Project Management
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Earned Value Management (EVM) is a strategy for determining the performance of a
project against the project baseline. There are three dimensions of EVM that is Earned Value
(EV, Planned value (PV), and Actual Cost (AC).
Planned Value (PV) is the value of an authorized budget that is assigned to a project
work schedule. This is the approved budget for the work to be done, and it does not involve
management reserve; in this case, the approved budget is $25,000.
Earned value (EV) is the value of work that is performed based on the authorized
budget for the work components. In this sense, this is the approved budget related to the work
that has already been accomplished (Chen, Chen, & Lin, 2016). EV utilizes the performance
measurement baseline (PMB) to calculate earned value for the accomplished part of the
project work.
Actual Cost (AC): This is the real value of the cost incurred for the work performed in
a given period (Wen, 2015). The actual cost entails all work measured by earned value in
addition to the cost elements like direct hours, direct costs, and indirect costs that can be
traced from the actual invoices.
EVM has three key components that play a significant role in this project in terms of
making advance decisions. Schedule variance (SV) is a critical element in earned value
management because it aids in assessing the progress of a project. SV provides the variance
between the earned value of the project when calculating the actual value; hence SV is
significant because it aids to determine whether the project is behind or ahead of schedule.
Schedule performance index (SPI) is a tool that indicates the actual efficiency of a project in
comparison to the planned project schedule (Webb, 2017). It is, therefore, a measure of
schedule efficiency illustrated as a ratio of earned value to planned value. Cost variance (CV)
deals with the project’s cost baseline by providing information regarding whether the project

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is under the budget or over budget. CV is performed by subtracting the actual cost from
earned value. If CV of a project is positive, it is an indication that the project is progressing
well, but if the CV is negative, then there is need to take corrective measure to get the project
back on track.
Cost performance index (CPI) is used for analyzing the efficiency of the cost used by
the project by measuring the value of accomplished work compared to the actual expense
used on the project.
EV is the estimated value of the project outcomes at the time of execution. PV is the
planned value of the project outcomes at the time of execution. BAC is the total planned
budget, and SV is calculated by subtracting the product of PV and CV from EV, which is
similar to the difference between EV and AC. Therefore, SPI = EV/PVCPI = EV/AC VAC =
BAC –EAC ETC = the new estimate based on projecting EAC = AC + ETC
In conclusion, earned value analysis plays a significant role in measuring the project’s
performance in several ways. EV analysis helps to integrate project work, cost, and schedule
using a work breakdown structure (EBS) (Chen, Chen, & Lin, 2016). By combining CPI and
SPI helps to estimate an upper bound to the EAC, which also when combined with CPI-based
lower bound it helps to determine various EACs.

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References
Chen, H. L., Chen, W. T., & Lin, Y. L. (2016). Earned value project management: Improving
the predictive power of planned value. International Journal of Project
Management, 34(1), 22-29.
Wen, C. H. E. N. (2015). Application of Earned Value Management in the Performance
Audit of Engineering Construction Project. Value Engineering, 2015(25), 3.
Webb, A. (2017). Using earned value: a project manager's guide. London: Routledge.
https://www.taylorfrancis.com/books/9781317003076
Chen, H. L., Chen, W. T., & Lin, Y. L. (2016). Earned value project management: Improving
the predictive power of planned value. International Journal of Project
Management, 34(1), 22-29.