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Understanding how to measure project performance is essential for effective management. Cost Variance (CV) and Schedule Variance (SV) are two key metrics used to assess whether a project is on track in terms of budget and schedule.
Cost Variance (CV)
Cost Variance indicates the difference between the budgeted cost of work performed and the actual cost incurred. It helps identify if a project is over or under budget.
The formula for Cost Variance is:
CV = Earned Value (EV) – Actual Cost (AC)
Where:
- Earned Value (EV): The budgeted cost of work actually completed.
- Actual Cost (AC): The real cost incurred for the work performed.
Schedule Variance (SV)
Schedule Variance measures the difference between the work planned and the work actually completed. It indicates if a project is ahead or behind schedule.
The formula for Schedule Variance is:
SV = Earned Value (EV) – Planned Value (PV)
Where:
- Planned Value (PV): The budgeted cost of work scheduled to be completed by this point.
Application in Project Management
Regular calculation of CV and SV allows project managers to identify issues early. Corrective actions can then be implemented to keep the project on track regarding costs and schedule.