A simple example of Earned Value Management in action.

**The Plan**

A team is tasked with planting trees on a new housing development.

– 30 batches of 20 trees (600 trees)

– Budgeted cost per tree £2.90 (£2.50 per small tree / 40 pence for slow release fertiliser)

Total budget = £1740

**Day 1**

– 70 trees were planted (the team hit a patch with stones that had to be removed before the trees could be planted)

– Total cost was £350 (a special machine was required to remove the stones which cost £147 for the day)

Simple EVM calculation:

– Earned Value = 70 trees planted x £2.90 = £203

– Budgeted Cost = 100 trees planned per day x £2.90 = £290

– Actual Cost = 70 tress planted x £2.90 + £147 for the machine = £350

**Think about cost**

The team have spent £350, but they should only have spend £203. The CV (Cost Variance) can be calculated as follows; EV-AC (Earned Value – Actual Cost).

The team is over budget and have spent 58% more budget than anticipated. This is the CPI (Cost Performance Index).

**Think about schedule**

The team are at the end of day 1, but they should only be a three quarters through the day. The SV (Schedule Variance) can be calculated as follows; EV-BC (Earned Value – Budgeted Cost.

The team is late and have only performed 70% of the work planned. This is SPI (Schedule Performance Index).

**The consequences**

Extending the Actual Cost into the future gives us the end result if we do not modify the performance of the project.

BAC (Budget at Completion) = £1740

EAT (Estimate at Completion) = £3000

Cost over = the difference between the BAC and EAC.

Planned Finish = 6 Days

EAC Finish = 8.57 Days

Project Slippage = the difference between Planned Finish at EAC

– If the team continue at this rate, they will need £3000 (Cost EAC) and 8.57 days (Schedule EAC) to finish the work.

– If the team want to finish on budget, they need to work at 104.3% of the originally planned performance (Planned remaining budget/Actual remaining budget).

– If the team want to finish on time, they need to work at 106% of the originally planned performance (Actual remaining work/Planned remaining work)

**Technical Terms**

In real life, the elements calculated above have slightly difference names:

– The Actual Cost is usually ACWP (Actual Cost of Works Performed.

– The Planned Cost is usually BCWS (Budgeted Cost of Work Scheduled)

– The Earned Value us usually BCWP (Budgeted Cost of Work Performed)

**Summary**