--- title: "How EVA controls cost; three examples" subject: "Project Engineering" chapter: 4 key: "semester_7/project_engineering:eva-cost-control-three-examples" source: https://www.bctengineer.com/q/semester_7/project_engineering/eva-cost-control-three-examples site: BCT Engineering --- # How EVA controls cost; three examples Project Engineering · Chapter 4: Project Implementation and Controlling - Asked in: 2076 Chaitra, 8 marks - Video: [What is Earned Value Management - EVM? PM in Under 5](https://www.youtube.com/watch?v=sAZZ5av9kk0) — Online PM Courses - Mike Clayton - Answer checked by Claude Opus 5.5 (high effort) on 2026-10-14 - Page: https://www.bctengineer.com/q/semester_7/project_engineering/eva-cost-control-three-examples - Whole chapter: https://www.bctengineer.com/md/semester_7/project_engineering/chapter-4 ## Question How is EVA used in controlling the cost of a project during project implementation? Explain EVA with 3 different examples requiring different approaches in control. ## Short answer EVA uses SV, CV, SPI, CPI and EAC to control costs. Example 1 (SPI 0.8, CPI 0.67): behind schedule, over budget; add resources to critical tasks and cut waste. Example 2 (SPI 1.1, CPI 1.15): ahead, under budget; sustain performance, check quality. Example 3 (SPI 1.0, CPI 0.83): on schedule but over budget; reduce costs without adding resources. ## Answer #### Use of EVA in controlling cost During implementation, at every review date the manager finds PV, EV and AC and calculates the variances and indices: $$ \begin{aligned} SV &= EV - PV, \qquad CV = EV - AC \\ SPI &= \frac{EV}{PV}, \qquad CPI = \frac{EV}{AC} \\ EAC &= \frac{BAC}{CPI}, \qquad ETC = EAC - AC, \qquad VAC = BAC - EAC \end{aligned} $$ CV and CPI show the cost performance; SV and SPI show the schedule performance; EAC forecasts the final cost. The result decides the control action. The same figures are plotted every month, so the trend is visible. A project with BAC = Rs 10,00,000 and a duration of 10 months, reviewed at month 5 (PV = Rs 5,00,000), is used for the three examples. #### Example 1: behind schedule and over budget PV = Rs 5,00,000, EV = Rs 4,00,000, AC = Rs 6,00,000. $SV = -1{,}00{,}000$, $CV = -2{,}00{,}000$, $SPI = 0.80$, $CPI = 0.667$, $EAC = 10{,}00{,}000 / 0.667 = 15{,}00{,}000$. Status: behind schedule, over budget. **Control approach:** both schedule and cost are in trouble, so the control must be strong: find the causes, add resources only to the critical activities, tighten cost control (wastage, rates), and revise the plan or scope with the client. If CPI is very low, consider stopping low-value work. #### Example 2: ahead of schedule and under budget PV = Rs 5,00,000, EV = Rs 5,50,000, AC = Rs 4,80,000. $SV = 50{,}000$, $CV = 70{,}000$, $SPI = 1.10$, $CPI = 1.146$, $EAC = 10{,}00{,}000 / 1.146 = 8{,}72{,}727$. Status: ahead of schedule, under budget. **Control approach:** the project is doing better than planned. Control here means keeping up the good performance: check that quality is not being sacrificed, keep the contingency, and release the extra resources or crew to other work. No corrective action is required. #### Example 3: on schedule but over budget PV = Rs 5,00,000, EV = Rs 5,00,000, AC = Rs 6,00,000. $SV = 0$, $CV = -1{,}00{,}000$, $SPI = 1.00$, $CPI = 0.833$, $EAC = 10{,}00{,}000 / 0.833 = 12{,}00{,}000$. Status: on schedule, over budget. **Control approach:** time is satisfactory but money is being lost, so the control is on cost only: reduce wastage, improve productivity, renegotiate rates or procurement, and control variations. Adding resources to speed up the work is not needed and would increase the cost. | Example | SPI | CPI | Status | Main control | |---|---|---|---|---| | 1 | 0.80 | 0.67 | Behind and over | Recovery plan, resources on critical work, cost control | | 2 | 1.10 | 1.15 | Ahead and under | Maintain, protect quality | | 3 | 1.00 | 0.83 | On schedule, over budget | Cost reduction only | Another case is behind schedule but under budget (EV = Rs 4,50,000, AC = Rs 4,00,000, SPI = 0.90, CPI = 1.13): here the saving can be used to add resources and recover time. ## Check yourself The answer's key points as multiple-choice questions, with the correct option and why. 1. How does the manager use EVA during implementation? A. Only at project completion B. Find PV, EV and AC at each review, compute variances and indices, and decide the control action C. Only compare AC with BAC D. Replace the schedule with the budget Answer: B. At every review PV, EV and AC give SV, CV, SPI, CPI and EAC; the results decide the control action and the trend is plotted. (Key point: How EVA controls cost) 2. Example 1 (PV 5,00,000, EV 4,00,000, AC 6,00,000) gives SPI 0.80 and CPI 0.67. The control approach is: A. No action B. Release resources to other work C. Cost control only D. Strong control: find causes, add resources to critical activities, tighten cost control Answer: D. Both time and cost are in trouble, so strong recovery and cost-control measures are needed. (Key point: Behind and over budget) 3. Example 2 (SPI 1.10, CPI 1.15) calls for: A. Maintaining performance, protecting quality, keeping contingency B. A recovery plan C. Cutting the budget D. Stopping the work Answer: A. The project is doing better than planned, so no corrective action is needed; just keep it up and avoid sacrificing quality. (Key point: Ahead and under budget) 4. Example 3 has SPI = 1.00 and CPI = 0.83. Why is adding resources to speed up wrong? A. Time is already satisfactory, so extra resources only raise cost; control should target cost B. Speeding up always saves money C. The project is behind schedule D. CPI above 1 means no problem Answer: A. The trouble is only cost, so reduce wastage, improve productivity and control rates and variations. 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