What Earned Value Management measures
Earned Value Management (EVM) is a project controls method that measures performance by comparing three values at a given point in time: Planned Value (PV) — the budgeted cost of work scheduled to be done by now; Earned Value (EV) — the budgeted cost of the work actually completed by now; and Actual Cost (AC) — what was actually spent to complete that work.
The reason EVM is more useful than tracking cost or schedule alone is that it ties spending to completed scope. A project can be under budget simply because work hasn't happened yet — comparing AC to the budget alone can't tell the difference between 'efficient' and 'behind schedule.' EVM can, because it measures cost against work actually earned, not just time elapsed.
CPI and SPI: the two core ratios
Cost Performance Index (CPI = EV ÷ AC) measures cost efficiency: a CPI above 1.0 means the project is delivering more earned value than it's spending — running under budget for the work completed. A CPI below 1.0 means the opposite — the work completed cost more than budgeted.
Schedule Performance Index (SPI = EV ÷ PV) measures schedule efficiency in cost terms: an SPI above 1.0 means more work has been earned than was planned by this point — ahead of schedule. An SPI below 1.0 means less work has been completed than planned.
Both indices are standard practice in capital-project cost engineering and are formally defined in PMI's Practice Standard for Earned Value Management and in AACE International's cost-engineering recommended practices — they are not project-specific or vendor-specific metrics.
Why it matters for capital projects
EVM's main value is as an early-warning system: because it's based on objective, budgeted-cost math rather than subjective percent-complete estimates, a slipping CPI or SPI tends to surface performance problems earlier than a simple schedule-vs-actual comparison would. That lead time is what makes it useful for corrective action rather than just after-the-fact reporting.
Many owners on capital and infrastructure projects require EVM reporting contractually, particularly on EPC and EPCM engagements, precisely because it gives a standardized, auditable way to compare performance across contractors and project phases.