Earned value for contractors, in plain English
Earned value is a simple way to know, halfway through a job, whether you are behind / on schedule and over / on budget, in dollars, while you can still fix it. No MBA needed. It runs on three numbers.
See it on a real job, free →The three numbers everything builds on
Forget the jargon. Everything in earned value comes from three plain numbers:
| Number | Plain meaning |
|---|---|
| Planned value (PV) | The dollar value of the work you planned to have done by today. |
| Earned value (EV) | The budget value of the work you have actually finished. |
| Actual cost (AC) | What you have actually spent so far. |
Line those three up and you instantly see if you are ahead or behind, and over or under.
Are you behind, or over? Two quick checks
Behind on schedule? Compare what you have finished to what you planned. Schedule Performance Index SPI = EV / PV. Above 1.0 = ahead, below 1.0 = behind. Over on budget? Compare what you have finished to what you have spent. Cost Performance Index CPI = EV / AC. Above 1.0 = under budget, below 1.0 = over. A number below 1.0 is a warning light, and the earlier you see it, the more you can do about it.
A real job, halfway through
A $44,000 kitchen. You planned to be 50 percent done by now, but you are really 40 percent done, and you have spent $20,000.
| Measure | Value | What it tells you |
|---|---|---|
| Planned value (50% of $44k) | $22,000 | What should be done by now |
| Earned value (40% of $44k) | $17,600 | What is actually done |
| Actual cost | $20,000 | What you have spent |
| SPI = EV / PV | 0.80 | Behind schedule |
| CPI = EV / AC | 0.88 | Over budget |
| Forecast final cost (EAC = budget / CPI) | $50,000 | ~$6,000 over the $44k budget |
Plain reading: you are behind and over, and at this rate the job lands around $50,000. You learned that at the halfway point, not at the end, so you still have time to re-sequence, tighten scope, or write a change order.
Forecasting and variances, simply
EAC (estimate at completion) = your budget divided by CPI: where the job lands if today's trend holds. VAC (variance at completion) = budget minus EAC: your projected over or under. Percent complete = earned value divided by total budget: how much is really done, by value. Across all of these, positive variance is good, negative is trouble.
See this on your own jobs, automatically
TradesMetrics tracks earned value as you log progress, and reads it back in plain language, ahead or behind, over or under, with the forecast, so you never touch a spreadsheet.
Start free →Common questions
- What is earned value management (EVM)?
- Earned value management is a simple way to tell, partway through a job, whether you are ahead or behind on schedule AND over or under on budget, in dollars, before it is too late to fix. It compares what you planned, what you have actually finished, and what you have actually spent.
- What are PV, EV, and AC?
- Three numbers. Planned value (PV) is the dollar value of the work you planned to have done by now. Earned value (EV) is the budget value of the work you have actually completed. Actual cost (AC) is what you have actually spent so far.
- What is schedule variance (SV) and the schedule performance index (SPI)?
- Schedule variance = EV minus PV; positive means ahead of schedule, negative means behind. SPI = EV divided by PV. Above 1.0 is ahead, below 1.0 is behind. An SPI of 0.8 means you are getting 80 cents of planned work done for every planned dollar.
- What is cost variance (CV) and the cost performance index (CPI)?
- Cost variance = EV minus AC; positive means under budget, negative means over. CPI = EV divided by AC. Above 1.0 is under budget, below 1.0 is over. A CPI of 0.9 means you are getting 90 cents of value for every dollar you spend.
- What does a CPI of 0.9 mean?
- You are over budget. For every dollar spent you are only earning 90 cents of budgeted work, so at this rate the job will finish about 11 percent over budget unless you change something.
- What is a good SPI or CPI?
- 1.0 means exactly on plan. Above 1.0 is good (ahead of schedule or under budget). Below 1.0 is a warning. The earlier in the job you catch a number under 1.0, the more time you have to fix it.
- How do you forecast the final cost of a job (EAC)?
- Estimate at completion (EAC) projects the final cost if today's efficiency holds: EAC = budget divided by CPI. If your $44,000 job is running at a CPI of 0.88, the forecast is about $50,000. Variance at completion (VAC) = budget minus EAC, so that is a projected $6,000 overrun.
- What is percent complete?
- Percent complete = earned value divided by the total budget (EV / BAC). It is how much of the job, by value, is actually done, which is more honest than a gut-feel percentage.
- What is the difference between schedule variance and cost variance?
- Schedule variance answers are you behind on time (EV vs PV). Cost variance answers are you over on money (EV vs AC). A job can be on budget but behind schedule, or on time but over budget, so you watch both.
- Why do contractors use earned value instead of just comparing spend to budget?
- Comparing spend to budget alone is misleading, because spending half your budget looks fine until you realize only a third of the work is done. Earned value ties spend to actual progress, so you see trouble while you can still act.
- What is budget at completion (BAC)?
- Budget at completion is the total budgeted cost of the job, your baseline. Earned value and forecasting are all measured against it.
- How do you fix a job that is behind or over budget?
- Catch it early via CPI and SPI, find which trades or line items are driving the variance, and act: re-sequence work, tighten scope, price a change order for added work, or correct the estimate on the next job. The point of EVM is to surface it in time to do something.
Explore
Cost guides: Kitchen remodel cost · Bathroom remodel cost · Basement finishing cost · Deck cost · Home addition cost · Whole-home reno cost (by state & province).
Contractor guides: How to price a job: markup vs margin · Earned value for contractors.