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Schedule Variance (SV) & Cost Variance (CV) in Project Cost
Management
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May 6, 2012
Fahad Usmani, PMP
Schedule Variance (SV) and Cost Variance (CV) are two essential parameters in Earned
Value Management. They help you analyze the project’s progress, i.e., how you are
performing in terms of schedule and cost.
Assume you are managing a construction project. The client asks you to update them
with the current status and progress of the project.
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What do they mean by asking for these metrics?
How will you get this information?
The client is asking for information on the cost incurred to date, work completed, and
how the project is performing in terms of cost and schedule.
You will get this information with the help of Earned Value Management. Earned Value
Management has three basic clements: Earned Value, Planned Value, and Actual Cost.
Earned Value is the value of the work completed to date. Planned Value is the money
you should have spent as per the schedule. Actual Cost is the cost spent on the project to
date.
These basic elements help you find Schedule Variance and Cost Variance. Schedule
Variance helps to understand if you are behind or ahead of schedule. Cost Variance
helps determine if you are under or over budget.
Variance analysis is the key to the success of any project, which is finished on time and
within the approved budget. Variance analysis helps monitor your project performance,
allowing you to take corrective action as soon as required, and it lets you know if you are
going in the correct direction or not.
Schedule Variance (SV)
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It is imperative for you to keep your project on schedule and Schedule Variance helps
you complete it on time. It enables you to avoid unnecessary cost overruns due to a slip
of schedule. Costs increase as you go over the stipulated time.
For example, you have rented some equipment for a specific duration of time and you
may end up paying more if you need this equipment for longer. You may need to rent
this equipment from other suppliers on an urgent, short-term contract at a higher price.
Schedule Variance is a vital analytical tool, it lets you know if you are ahead of schedule
or behind schedule in dollars.
The Formula for Schedule Variance (SV)
You can calculate Schedule Variance by subtracting Planned Value from Earned Value.
Schedule Variance = Earned Value — Planned Value
SV =EV-PV
From the above formula, we can conclude that:
+ You are ahead of schedule if the Schedule Variance is positive.
+ You are behind schedule if the Schedule Variance is negative.
+ You are on schedule if the Schedule Variance is zero.
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When the project is complete, the Schedule Variance becomes zero because all Planned
Value has been earned.
Example of Schedule Variance (SV)
You have a project to be completed in 12 months and the budget of the project is
100,000 USD. 6 months have passed and 60,000 USD has been spent, but on a closer
review, you find that only 40% of the work has been completed.
Find the project’s Schedule Variance (SV) and determine if you are ahead of schedule or
behind schedule.
Given in the question:
Actual Cost (AC) = 60,000 USD
Planned Value (PV) = 50% of 100,000
= 50,000 USD
Please note that in the question, the Planned Value is not specifically given but the
question says that half of the time has passed. In such a situation, you can assume that
the budget was evenly distributed, so the planned value will be 50%.
Earned Value (EV) = 40% of 100,000
hitpslipmetudyccle.com/schedule-variance-ev-cost-varance-cvsn-project-cost-management 41389rra0a ‘Schedule Variance (SV) & Cost Variance (CV) in Project Cost Management| PM Study Circle
= 40,000 USD
Now,
Schedule Variance = Earned Value — Planned Value
= 40,000 ~ 50,000
= -10,000 USD
The project’s Schedule Variance is -10,000 USD. You are behind schedule since it is
negative.
Cost Variance (CV)
Cost Variance is as important as Schedule Variance. You must complete your project
within the approved budget. Exceeding the planned budget is bad for you and your
stakeholders.
Everything is about money. Clients are very cautious about spending; because any
deviation from the cost baseline can affect their profit. In the worst case, they may have
to put more money into the project to complete it. This is detrimental if the contract is
fixed price.
Cost Variance deals with the cost baseline of the project. It provides you with
information on whether you are over or under budget, in dollar terms. Cost Variance is
hitpslipmetudyccle.com/schedule-variance-ev-cost-varance-cvsn-project-cost-management 51369rra0a ‘Schedule Variance (SV) & Cost Variance (CV) in Project Cost Management| PM Study Circle
a measure of the cost performance of a project.
The Formula for Cost Variance (CV)
Cost Variance can be calculated by subtracting the actual cost from the Earned Value.
Cost Variance = Earned Value — Actual Cost
CV =EV—AC
We can conclude the following from the above formula:
+ You are under budget if the Cost Variance is positive.
+ You are over budget if the Cost Variance is negative.
+ You are on the budget if the Cost Variance is zero.
Example of Cost Variance (CV)
You have a project to be completed in 12 months, and the budget of the project is
100,000 USD. 6 months have passed, and 60,000 USD has been spent, but on closer
review, you find that only 40% of the work has been completed so far.
Find the project’s Cost Variance (CV) and determine if you are under budget or over
budget.
hitpsipmetudycle.com/schedule-variance-ev-cost-varance-cvsn-project-cost-management 6969rra0a ‘Schedule Variance (SV) & Cost Variance (CV) in Project Cost Management| PM Study Circle
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Actual Cost (AC) = 60,000USD
Earned Value (EV) = 40% of 100,000 USD
= 40,000 USD
Now,
Cost Variance = Earned Value — Actual Cost
CV =EV—AC
= 40,000 — 60,000
= -20,000 USD
Hence, the project’s Cost Variance is -20,000 USD, and you are over budget since it is
negative.
Summary
Schedule Variance and Cost Variance are great tools for analyzing project health. As a
project manager, you should monitor these variances for any deviations. If both
variances are positive, this means that your project is progressing well. However,
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something is wrong if either variance is negative and you have to take corrective action
to bring the project back on track.
How are you using Schedule Variance and Cost Variance in your project? Please share
your experience in the comments section.
This blog post is the third in a series of seven on Earned Value Management and project
forecasting, Please read through my previous two posts before reading this post if you're
coming here from a search engine or a referral.
‘The following are the links for other blog post:
+ Earned Value Management
+ Elements of Earned Value Management
+ Schedule Variance and Cost Variance (You are here)
+ Schedule Performance Index and Cost Performance Index
+ Estimate at Completion
+ Estimate to Complete
+ To Complete Performance Index
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