- Earned value compares three figures together: the value of planned work, the budgeted value of work actually done, and actual cost, so it reveals delay and cost overrun early.
- A CPI below 1 means each riyal spent is delivering less than a riyal's worth of work, and an SPI below 1 means less work has been done than planned to date.
- The accuracy of the results depends on measuring progress against objective criteria set before work starts, not on an impression of percentage complete.
Why comparing spend with budget is not enough
Imagine a report saying the project has spent 50% of its budget and we are halfway through its duration. Everything looks fine. But that figure says nothing about how much work has actually been done; only a quarter of the project might be complete.
Earned value management closes that gap. PMI’s standard defines it as a methodology that integrates scope, schedule and resources, measures performance and progress objectively, and forecasts project outcomes. [1] In other words, it answers three questions at once: are we on plan, are costs where they should be, and what will the rest cost?
The three measures the system rests on
All earned value calculations are built on three figures read at the same status date, plus the total budget:
- Planned value (PV): the budget for the work that should have been done to date.
- Earned value (EV): the approved budget for the work actually done.
- Actual cost (AC): what was actually spent on the work done.
- Budget at completion (BAC): the total approved budget for the project.
The key idea is that EV is measured in budget, not spend. If a work package has a budget of SAR 100,000 and is fully complete, its earned value is SAR 100,000 whether it cost 80,000 or 130,000.
Variances and indices: what the numbers say
Four core indicators are calculated from the three measures. The US Department of Energy reference card treats indices above 1 as favourable and below 1 as unfavourable. [4]
| Indicator | Formula | If negative or below 1 |
|---|---|---|
| Cost variance (CV) | EV − AC | We spent more than the work is worth |
| Schedule variance (SV) | EV − PV | We did less than planned |
| Cost performance index (CPI) | EV ÷ AC | Poor spending efficiency |
| Schedule performance index (SPI) | EV ÷ PV | Slower rate of progress |
| Variance at completion (VAC) | BAC − EAC | Expected budget overrun |
To express variance as a percentage, divide cost variance by EV and schedule variance by PV. [4] Overall percentage complete is EV divided by BAC, and the percentage of budget spent is AC divided by BAC. [4] Putting those two figures side by side in a report shows immediately whether spending is running ahead of progress.
Hypothetical example: a project in its fifth month
A project to develop an online system for a government entity has a budget of SAR 2,000,000 and a duration of ten months. At the end of month five:
| Measure | Value |
|---|---|
| Planned value (PV) | SAR 1,000,000 |
| Earned value (EV) | SAR 800,000 |
| Actual cost (AC) | SAR 1,000,000 |
Results: cost variance is minus SAR 200,000, schedule variance is minus SAR 200,000, CPI is 0.8 and SPI is 0.8. The project has spent exactly what was planned, but has completed only 80% of what it should have, and at a higher cost than budgeted.
Had the report simply compared spend with plan, the project would have looked under control. Earned value shows it is both late and over cost.
What will the project cost at completion?
Estimate at completion (EAC) is actual cost to date plus the estimated cost of the remaining work. Remaining work is BAC minus EV. [4] In our example, remaining work is SAR 1,200,000 in budget terms.
- Assuming current cost efficiency continues: EAC = BAC ÷ CPI = SAR 2,500,000.
- Assuming the delay will also drive up cost: EAC = AC + remaining work ÷ (CPI × SPI) = SAR 2,875,000.
GAO’s guide explains that the cumulative CPI formula usually gives the lowest estimate, so it is best read as the best case, and the CPI × SPI formula usually gives the highest, so it is read as the worst case. [6] So present management with a range, not a single figure: from SAR 2.5 million to about 2.9 million, an expected overrun of between SAR 500,000 and 875,000.
The guide also reports research finding that once a programme is 20% complete, cumulative CPI varies by less than 10% from its value, and that it tends to worsen as completion approaches. [6] The practical message: do not wait for efficiency to “recover naturally” without a tangible reason.
To-complete performance index (TCPI)
This index measures the efficiency needed on the remaining work to hit a given financial target: remaining work divided by remaining money. [4] To stay within the original budget in our example: 1,200,000 ÷ 1,000,000 = 1.2. The team would need to deliver SAR 1.2 of work for every riyal, having so far delivered only 0.8.
If TCPI is higher than CPI, the team is assuming improved productivity, and the analyst should look for evidence that supports that assumption. [6]
How do you measure progress objectively?
Earned value is only as accurate as the way progress is measured. GAO’s guide requires objective measures of earned value to be set before work starts, and sets out the following techniques: [5]
| Technique | When to use it |
|---|---|
| Fixed formula (0/100, 50/50, 25/75) | Short packages that start and finish within two reporting periods; 0/100 for those that start and finish within one |
| Weighted milestones | Longer packages with tangible interim results, with at least one interim milestone in each reporting period |
| Physical measurement | Units directly tied to completion, such as length of cable laid or quantity of concrete poured |
| Percent complete | Where the estimate can rest on objective, quantifiable evidence of completion |
| Level of effort (LOE) | Work with no discrete output, such as project management; use sparingly |
The guide warns that heavy reliance on level of effort means the system will not do its job, and notes that work packages typically run for 4 to 6 weeks. [5]
The limits of SPI
SPI measures schedule in money, not time, and that gives it a known limitation: it returns to 1.0 when the programme is complete, and its predictive value declines as work progresses. [6] A project that finishes three months late will end with an SPI of 1.
So do not rely on it alone in the final third of a project; review the critical path alongside it. Are the late activities on the critical path, or do they have float? PMI’s Standard for Earned Value Management (2019) includes the concept of earned schedule, which extends the meaning of value to measure time performance. [1]
The reference standards: PMI and EIA-748
PMI publishes The Standard for Earned Value Management (2019), which builds on the earlier Practice Standard for Earned Value Management and covers hybrid approaches that combine earned value with agile practices. [1]
EIA-748 is the reference for earned value management systems on large contracts. Revision E was issued in February 2026 and sets out seven principles that apply to all programmes, while its detailed guidelines are directed at large, complex or high-risk programmes. [2] The revision cut the guidelines from 32 to 27, organised in the same five process categories. [3]
In the Gulf, the level of application is usually set by the contract terms or by the organisation’s project management office policy. If a contract requires an EIA-748-compliant system, ask for the contractor’s approved system description rather than relying on monthly reports alone.
Implementation steps for your project
- 1Break down the workWBS and a manager per control account
- 2ScheduleCritical path and logic links
- 3BudgetBudget per package, plus management reserve
- 4Progress criterionSet before work starts
- 5BaselineTime-phased plan for measurement
- 6Analyse and forecastMonthly variances and estimates
Start with a work breakdown structure and assign a manager to each control account, where a WBS element meets the organisational unit responsible for it, then link the schedule to the budget to produce the performance measurement baseline. Set the progress criterion for each package before it starts, then analyse variances and update estimates at least monthly, comparing them with the results of risk analysis. [5] Record every baseline change in a change log, so that variances do not disappear through replanning.
Conclusion
Earned value turns “how much have we spent?” into “what have we delivered for what we spent?”. Calculate CPI and SPI every month, present the estimate at completion as a range between best and worst case, and make progress measurement objective before trusting any figure.
Frequently asked questions
What is the difference between earned value and actual cost?
Earned value is the approved budget for the work actually completed, while actual cost is what was spent to complete that work. The difference between them is the cost variance. [4]
What does a CPI of 0.8 mean?
It means every unit of currency spent produced work with a planned value of only 0.8 units. Indices above 1 are favourable and below 1 unfavourable. [4]
Why does SPI move towards 1 at the end of a project even if it is late?
Because earned value equals the full budget once the work is complete, however late, so the index returns to 1 at completion and becomes less meaningful in the final stages. That is why it is paired with critical path analysis. [6]
Is earned value suitable for small projects?
Yes, in a simplified form. EIA-748-E makes the system's principles applicable to all programmes and directs its detailed guidelines at large, complex or high-risk programmes. [2]
How often should estimates at completion be updated?
GAO's guide recommends producing estimates from earned value data at least monthly and comparing them with the results of risk analysis. [5]
References
- Project Management Institute (PMI). The Standard for Earned Value Management (2019)
- SAE International. EIA748E Earned Value Management Systems (2026)
- Humphreys & Associates. EIA-748 Standard for EVMS Revision E Published (2026)
- U.S. Department of Energy. DOE EVMS Gold Card (2019)
- U.S. Government Accountability Office (GAO). Cost Estimating and Assessment Guide (GAO-20-195G): EVM Process (2020)
- U.S. Government Accountability Office (GAO). Cost Estimating and Assessment Guide (GAO-20-195G): Project Future Performance (2020)
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