T05: Budget & Resources | Domain 2

🔢 EVM — Earned Value Management

🇺🇸 English

EVM integrates scope, schedule, and cost to measure project performance objectively. Three key values:

PV (Planned Value / BCWS): Budgeted cost of work scheduled — "What should have been done by now, cost-wise?"
EV (Earned Value / BCWP): Budgeted cost of work performed — "What did we actually accomplish, in budget terms?"
AC (Actual Cost / ACWP): Actual cost of work performed — "What did we actually spend?"

Reference: PMI — EVM Fundamentals

🇻🇳 Tiếng Việt

EVM tích hợp scope, lịch trình và chi phí để đo lường hiệu suất dự án một cách khách quan. Ba giá trị chính:

PV (Planned Value): Chi phí ngân sách của công việc được lên kế hoạch — "Đến giờ này đáng lẽ phải làm xong bao nhiêu?"
EV (Earned Value): Chi phí ngân sách của công việc đã hoàn thành — "Thực sự đã hoàn thành được bao nhiêu?"
AC (Actual Cost): Chi phí thực tế của công việc đã thực hiện — "Thực tế đã chi bao nhiêu?"

EVM Formula Reference Card

── VARIANCES ─────────────────────────────────────── CV = EV - AC Cost Variance | +ve = UNDER budget ✓ | -ve = OVER budget ✗ SV = EV - PV Schedule Variance | +ve = AHEAD ✓ | -ve = BEHIND ✗ ── PERFORMANCE INDICES ───────────────────────────── CPI = EV / AC Cost Perf. Index | >1 = under budget ✓ | <1 = over budget ✗ SPI = EV / PV Sched Perf. Index | >1 = ahead ✓ | <1 = behind ✗ ── FORECASTS ─────────────────────────────────────── EAC = BAC / CPI Estimate at Completion (typical — past performance continues) EAC = AC + ETC When re-estimating remaining work EAC = AC + (BAC-EV) When past variance is atypical (one-time) ETC = EAC - AC Estimate to Complete (remaining work) VAC = BAC - EAC Variance at Completion (+ve = under, -ve = over) ── TCPI (To-Complete Performance Index) ──────────── TCPI = (BAC - EV) / (BAC - AC) Performance needed for rest of project to meet BAC If TCPI > 1: harder than historical performance | <1: easier ── EXAMPLE ───────────────────────────────────────── BAC=$100k | PV=$60k | EV=$50k | AC=$55k CV = $50k - $55k = -$5k (OVER budget) SV = $50k - $60k = -$10k (BEHIND schedule) CPI = 50/55 = 0.91 (spending more than planned) SPI = 50/60 = 0.83 (progressing slower) EAC = $100k / 0.91 = $110k (project will cost $110k total)

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Exam Tips — EVM

CV và SV: positive = good. Nhớ: "Cost Variance positive = money left over (good)"
CPI và SPI: >1 = good. "CPI of 1.2 means you're getting $1.20 of work for every $1.00 spent"
Most common EAC formula for exam: BAC/CPI (assume past performance continues)
Agile: EVM có thể dùng với velocity và burndown charts — không exclusive to predictive
Practice EVM calculation questions — 5-8 calculation questions trên đề thi thật

💼 Thực chiến / Scenario

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FinTech Company X — EVM in Practice

Situation: Cuối tháng 2 của Project Alpha (10-month project, $500K budget).

BAC = $500,000 | Project is 20% complete by plan (PV = $100,000) | Team actually completed 15% of work (EV = $75,000) | Actual spend = $85,000 (AC)

EVM Analysis: CV = $75k - $85k = -$10K (over budget). SV = $75k - $100k = -$25K (behind schedule). CPI = 75/85 = 0.88 (spending $1.14 for every $1.00 earned). SPI = 75/100 = 0.75 (only progressing at 75% of planned pace). EAC = $500k / 0.88 = $568,000 (project will cost ~$568K if trend continues).

PM Action: Report to sponsor with full EVM data. Root cause analysis: two developers were delayed by unrelated production issues (resource conflict). Action: dedicated sprint for Project Alpha (no context switching). Revised EAC and timeline communicated to stakeholders.

✏️ Practice Questions

EVM Calculation

Project: BAC = $200,000. After 3 months: PV = $80,000, EV = $70,000, AC = $65,000. What is the CPI and what does it indicate?

A. CPI = 0.93 — project is slightly over budget
B. CPI = 1.08 — project is under budget (getting more value than spent)
C. CPI = 0.88 — project is significantly over budget
D. CPI = 1.15 — project is well under budget

✅ Answer: B — CPI = 1.08
CPI = EV / AC = $70,000 / $65,000 = 1.077 ≈ 1.08
CPI > 1 means the project is under budget — for every $1 spent, $1.08 of value is earned. Note: SPI = 70/80 = 0.875 (behind schedule, but under budget).

Question 2

BAC = $500,000. After 6 months: EV = $200,000, AC = $250,000, PV = $280,000. What is the project's forecast at completion (EAC using the typical formula) and what does TCPI tell us?

A. EAC = $625,000; TCPI = 0.75 (remaining work is easier than current performance)
B. EAC = $625,000; TCPI = 1.2 (harder — the team must perform better than current efficiency to meet BAC)
C. EAC = $550,000; TCPI = 1.0 (remaining work matches current performance)
D. EAC = $500,000; TCPI = 1.0 (project is on track)

✅ Answer: B
CPI = EV / AC = 200,000 / 250,000 = 0.8 (over budget — spending $1.25 for every $1 of value earned)
EAC = BAC / CPI = 500,000 / 0.8 = $625,000 (project will overrun by $125K if trend continues)
TCPI = (BAC − EV) / (BAC − AC) = (500,000 − 200,000) / (500,000 − 250,000) = 300,000 / 250,000 = 1.2
TCPI > 1 means the team must be more efficient on remaining work than they have been so far to still meet the original BAC — a challenging target. PM should update sponsor with revised EAC and implement cost controls.

Question 3

CPI = 0.75 on your project. What does this mean and what actions should the PM consider?

A. For every $1 earned in value, $0.75 was spent — the project is under budget
B. For every $1 spent, only $0.75 of value is earned — the project is over budget; PM should analyze root cause, implement cost controls, and update EAC for the sponsor
C. The schedule is 25% behind plan
D. 75% of the project scope has been completed

✅ Answer: B — CPI = EV / AC. A CPI of 0.75 means for every $1.00 actually spent (AC), only $0.75 of budgeted work value (EV) was delivered. The project is over budget. The PM should: (1) identify root cause of the cost overrun, (2) implement corrective actions (reduce scope, optimize resources, negotiate), (3) recalculate EAC (= BAC / 0.75) and report to sponsor, (4) update the cost baseline if scope or circumstances have permanently changed.

🤖 AI Tools for PMs

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How AI Augments This Process

AI helps PMs interpret EVM metrics, generate variance analysis narratives, build budget forecasts, and communicate financial performance clearly to non-financial stakeholders.

Sample Claude Prompts

EVM interpretation and narrative Help me interpret my project's Earned Value metrics and write an executive narrative. Project data: BAC (Budget at Completion): $[amount] PV (Planned Value) to date: $[amount] EV (Earned Value) to date: $[amount] AC (Actual Cost) to date: $[amount] Calculate and interpret: CV = EV - AC: (positive = under budget, negative = over budget) SV = EV - PV: (positive = ahead of schedule, negative = behind) CPI = EV/AC: (>1 efficient, <1 inefficient) SPI = EV/PV: (>1 ahead, <1 behind) EAC = BAC/CPI: (estimated final cost) ETC = EAC - AC: (cost to complete) VAC = BAC - EAC: (variance at completion — positive = savings, negative = overrun) Write: 1. A 3-sentence executive summary of financial health 2. Root cause hypotheses for variances (schedule and cost) 3. Recommended corrective actions if CPI or SPI < 0.9 4. The one metric the sponsor should focus on and why

Budget variance explanation I need to explain a budget variance to my sponsor/PMO. Planned budget to date: $[amount] Actual spend to date: $[amount] Variance: $[amount] ([%] over/under) Root causes: [list what drove the variance] Is this variance recoverable? [yes/no — reasoning] Impact on final budget: [will we overrun? by how much?] Draft a variance explanation that: 1. States the variance factually (no minimizing, no panic) 2. Explains the root causes in business terms (not accounting jargon) 3. Distinguishes controllable vs. uncontrollable causes 4. Presents 3 options: (a) absorb within budget, (b) request additional funds, (c) scope reduction 5. Makes a clear recommendation with rationale Keep it under 1 page.

Budget forecast for phase completion I need to forecast the budget required to complete the remaining project work. Completed work: [% done] Budget consumed to date: $[amount] ([%] of total) Known upcoming costs: [list major remaining cost items] Forecast risks that could affect budget: [list] Current CPI: [value — if known] Use EAC methods to generate a range forecast: 1. EAC = BAC/CPI (performance-based — assumes current efficiency continues) 2. EAC = AC + ETC (bottoms-up — assumes we can re-plan remaining work) 3. EAC = AC + (BAC-EV) (optimistic — assumes remaining work goes as planned) Recommend which EAC method is most appropriate for this project's situation and explain why. Draft the budget section of my next steering committee report.

Jira / Confluence Template

Confluence — EVM Dashboard

── CONFLUENCE: EVM FINANCIAL DASHBOARD ────────────────── Project: [Project Alpha] | Reporting date: [YYYY-MM-DD] | Phase: [Sprint 8 of 12] ── EARNED VALUE SNAPSHOT ───────────────────────────────── BAC: $[total budget] PV: $[planned value to date] (% planned complete: [%]) EV: $[earned value to date] (% actually complete: [%]) AC: $[actual cost to date] (% budget consumed: [%]) ── VARIANCES ───────────────────────────────────────────── CV: $[EV-AC] → [🟢 Under budget / 🔴 Over budget] SV: $[EV-PV] → [🟢 Ahead / 🔴 Behind schedule] CPI: [EV/AC] → [>1.0 efficient / <1.0 over-spending] SPI: [EV/PV] → [>1.0 ahead / <1.0 behind] ── FORECAST ────────────────────────────────────────────── EAC: $[BAC/CPI] | ETC: $[EAC-AC] | VAC: $[BAC-EAC] Forecast: [On track to complete within budget / Expected overrun of $X] Top variance driver: [reason in 1 sentence]

Plan and Manage Budget and Resources