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Financialaka: EVaka: earned value managementaka: EVM

Earned Value

In Plain English

A method that measures both schedule and cost performance together to accurately predict how a project will finish.

Definition

Earned value (EV) is a project performance measurement technique that integrates scope, schedule, and cost data to objectively assess project progress and forecast final performance. Key metrics include Budgeted Cost of Work Performed (BCWP), Budgeted Cost of Work Scheduled (BCWS), and Actual Cost of Work Performed (ACWP). Schedule Performance Index (SPI) and Cost Performance Index (CPI) indicate whether the project is ahead or behind in schedule and under or over budget.

Why It Matters in Bidding

Earned value turns a contractor's progress into objective cost and schedule indices, giving project teams and owners an early-warning signal when a job is trending over budget or behind before it shows up in the final numbers. For estimators, EV data from completed jobs validates whether bid assumptions on production and pricing held up, closing the loop between the estimate and actual field performance.

Example

Midway through a paving job, a project manager runs earned value and finds a CPI of 0.92, signaling the crew has spent more than the budgeted value of work earned, prompting a productivity review before the overrun grows.

Related Terms

Cost to CompleteJob CostingWork in Progress (WIP)Schedule of Values

Frequently Asked Questions

CPI (cost performance index) divides earned value by actual cost; below 1.0 means over budget. SPI (schedule performance index) divides earned value by planned value; below 1.0 means behind schedule. Together they quantify performance objectively, letting teams forecast the final cost and completion date and act before small variances compound.
Percent complete reports how much work is done, but earned value compares the budgeted value of that work against both what was actually spent and what was planned. This three-way comparison reveals whether progress is being achieved efficiently, not just whether it is happening, which percent-complete billing alone cannot show.
Full earned value systems are common on large or federal projects, but the core idea scales down. Even a simplified tracking of budgeted value earned versus actual cost helps a contractor catch productivity slippage early. The effort to collect cost and progress data must be weighed against project size and contract requirements.

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