Methodology

Earned Value Indices

How three numbers become a forecast, why the schedule index lies at the end of a project, and what TCPI is really asking.

Three inputs, everything else derived

Earned value management needs exactly three measurements: what the plan said should be done by now (planned value), what has actually been completed valued at plan rates (earned value), and what has been spent to achieve it (actual cost). Every index and forecast follows from those three.

The cost performance index is the ratio of value earned to money spent. At 0.857 it says that every pound spent has produced 85.7 pence of budgeted work — and projecting that across the remaining budget is where the forecast at completion comes from.

CPI = \frac{EV}{AC}, SPI = \frac{EV}{PV}, EAC = \frac{BAC}{CPI}

CPI is earned value over actual cost; SPI is earned value over planned value; the estimate at completion is the budget divided by CPI.

EV: earned value — completed work at budget rates
AC: actual cost of that work
PV: planned value — what the baseline scheduled by now
BAC: budget at completion

Why SPI converges to 1.0 and becomes useless

The schedule performance index is measured in currency rather than in time, and at completion earned value equals planned value by definition. A project delivered a year late therefore finishes with SPI exactly 1.0.

This is not a flaw to be worked around; it is a property to be understood. SPI is informative in the middle of a project and meaningless at the end, and time performance belongs to the schedule network rather than to an index denominated in money.

TCPI is the reality check

The to-complete performance index asks what efficiency the remaining work must achieve for the project still to land on budget. It is the most useful number EVM produces, because it converts optimism into a testable claim.

If CPI has been 0.86 all project and TCPI is 1.12, the plan is asking you to believe the team will become thirty percent more efficient than it has ever been. That is occasionally true — after a genuine change in method — and usually not.

TCPI = \frac{BAC - EV}{BAC - AC}

TCPI is the work remaining divided by the money remaining, both measured against the original budget.

Every index depends on one soft number

Earned value is an assessment of how much is genuinely complete, and it is the input most easily corrupted. Optimistic percent-complete reporting produces a healthy CPI on a failing project right up until the final month, and this is the standard failure mode of EVM in practice.

The defence is objective measures — units installed, milestones passed, tests witnessed — rather than a judgement of how far along something feels.

Calculators that use this method

Earned Value Management (EVM) CalculatorCPI, SPI, variances and a forecast at completion from planned value, earned value and actual cost.

Basis

PMBOK earned value definitions; EAC = BAC ÷ CPI is one of several sanctioned forecast formulas.