EVM Forecasting

🔮 EVM Forecasting: Predicting Your Project’s Future

The Crystal Ball of Project Management

Imagine you’re on a road trip to Grandma’s house. You’ve driven for 2 hours and covered 100 miles. But wait—you’ve already spent $50 on gas when you planned to spend only $40!

The big questions:

• How much will the WHOLE trip cost? 💰
• How much MORE money do you need? 🆘
• Will you be over or under budget at the end? 📊
• How hard do you need to try to stay on budget? 🎯

EVM Forecasting answers these exact questions for your project. It’s like having a crystal ball that uses MATH instead of magic!

🏠 Our Everyday Analogy: Building a Treehouse

Let’s say you’re building a treehouse with a budget of $200 (this is your BAC - Budget at Completion).

You’re halfway through building (walls are done, roof is next).

Here’s what happened so far:

• You’ve spent $120 (this is your AC - Actual Cost)
• But the work you completed is only worth $100 (this is your EV - Earned Value)

Uh oh! You spent more than the value of work done. Now let’s predict the future!

📊 The Four Forecasting Formulas

graph TD
    A["🎯 BAC = $200<br>Total Budget"] --> B["📍 Current Status"]
    B --> C["💸 AC = $120<br>Money Spent"]
    B --> D["✅ EV = $100<br>Work Value Done"]
    C --> E["🔮 FORECASTING"]
    D --> E
    E --> F["EAC<br>Total Cost Prediction"]
    E --> G["ETC<br>Money Still Needed"]
    E --> H["VAC<br>Budget Difference"]
    E --> I["TCPI<br>Required Efficiency"]

1️⃣ EAC - Estimate at Completion

What is it?

EAC tells you: “How much will the WHOLE project cost when it’s done?”

Think of it like this: You’re halfway through your treehouse, already overspent. EAC predicts your final bill!

The Main Formula (When Current Performance Continues)

EAC = BAC ÷ CPI

Where CPI = EV ÷ AC (Cost Performance Index - how efficiently you spend money)

🏠 Treehouse Example

Step 1: Calculate CPI

CPI = EV ÷ AC
CPI = $100 ÷ $120
CPI = 0.83

This means for every $1 you spend, you only get $0.83 worth of work. Ouch!

Step 2: Calculate EAC

EAC = BAC ÷ CPI
EAC = $200 ÷ 0.83
EAC = $241

🎯 Plain English: “If you keep working the same way, your $200 treehouse will cost $241!”

Other EAC Formulas

2️⃣ ETC - Estimate to Complete

What is it?

ETC tells you: “How much MORE money do I need from RIGHT NOW?”

It’s like checking your wallet mid-trip and asking, “Do I have enough for the rest?”

The Formula

ETC = EAC - AC

Or the direct calculation:

ETC = (BAC - EV) ÷ CPI

🏠 Treehouse Example

ETC = EAC - AC
ETC = $241 - $120
ETC = $121

🎯 Plain English: “You’ve spent $120 already. You need $121 MORE to finish!”

Quick Comparison

3️⃣ VAC - Variance at Completion

What is it?

VAC tells you: “Will I be OVER or UNDER budget at the end?”

It’s the difference between what you PLANNED to spend and what you’ll ACTUALLY spend.

The Formula

VAC = BAC - EAC

🏠 Treehouse Example

VAC = BAC - EAC
VAC = $200 - $241
VAC = -$41

🎯 Plain English: “You’ll be $41 OVER budget!” (Negative = bad news)

Reading VAC Results

4️⃣ TCPI - To-Complete Performance Index

What is it?

TCPI tells you: “How HARD do I need to work to meet my goal?”

It’s like asking: “I ate half my Halloween candy in one day. How strictly do I need to ration the rest to make it last all month?”

The Formula (To Meet Original Budget)

TCPI = (BAC - EV) ÷ (BAC - AC)

🏠 Treehouse Example

TCPI = (BAC - EV) ÷ (BAC - AC)
TCPI = ($200 - $100) ÷ ($200 - $120)
TCPI = $100 ÷ $80
TCPI = 1.25

🎯 Plain English: “For every $1 you spend from now on, you need to get $1.25 worth of work done!”

Reading TCPI Results

Alternative TCPI (To Meet New Estimate)

If management gives you a new budget (EAC), use:

TCPI = (BAC - EV) ÷ (EAC - AC)

🗺️ The Complete Picture

graph TD
    A["🎬 Project Start<br>BAC = $200"] --> B["📍 Mid-Project Check"]
    B --> C["AC = $120<br>💸 Spent"]
    B --> D["EV = $100<br>✅ Value Done"]
    C --> E{Calculate CPI}
    D --> E
    E --> F["CPI = 0.83<br>⚠️ Overspending!"]
    F --> G["EAC = $241<br>🔮 Final Cost"]
    G --> H["ETC = $121<br>💰 Still Need"]
    G --> I["VAC = -$41<br>📉 Over Budget"]
    F --> J["TCPI = 1.25<br>🎯 Must Improve!"]

🎮 Real-World Scenario

Software Project Example:

Calculations:

• EAC = $500,000 ÷ 0.83 = $602,410 (Will cost $102,410 extra!)
• ETC = $602,410 - $300,000 = $302,410 (Still need this much)
• VAC = $500,000 - $602,410 = -$102,410 (Over budget by this much)
• TCPI = ($500,000 - $250,000) ÷ ($500,000 - $300,000) = 1.25 (Need 25% more efficiency!)

🧠 Memory Tricks

The “FEET” Memory Trick

• Final cost? → EAC
• Extra needed? → ETC
• Total variance? → VAC + “how much over/under”
• Try how hard? → TCPI

Formula Relationships

EAC = AC + ETC       (What you spent + What's left)
ETC = EAC - AC       (Total minus what's spent)
VAC = BAC - EAC      (Planned minus predicted)

⚠️ Common Mistakes to Avoid

🎯 Quick Decision Guide

After calculating, ask yourself:

1. Is CPI below 1.0? → You’re overspending! 💸
2. Is EAC higher than BAC? → Prepare for cost overrun 📈
3. Is VAC negative? → You’ll exceed budget ⚠️
4. Is TCPI above 1.2? → Serious changes needed! 🚨

🌟 Key Takeaways

1. EAC = Your predicted final cost (the crystal ball answer)
2. ETC = Money you still need (check your wallet!)
3. VAC = Over or under budget (good news or bad news)
4. TCPI = How hard you need to work (reality check!)

Remember: These formulas help you see problems EARLY so you can fix them BEFORE it’s too late. That’s the real power of EVM Forecasting!

You’ve just learned to predict the future of any project. Not with magic—with MATH! 🧙‍♂️✨