Cost Variance (CV) and Schedule Variance (SV) are important key performance indicators (KPIs) used in project management to assess project performance in terms of budget and schedule. Here’s an explanation of each:
Cost Variance (CV):
- Cost Variance (CV) is a KPI that measures the difference between the planned or budgeted cost of a project and the actual cost incurred. It quantifies whether the project is under or over budget.
Formula: CV = Earned Value (EV) – Actual Cost (AC)
Interpretation:
- If CV is positive, it means the project is under budget, indicating cost savings.
- If CV is negative, it means the project is over budget, indicating budget overruns.
- If CV is zero, the project is on budget.
Schedule Variance (SV):
- Schedule Variance (SV) is a KPI that measures the difference between the planned or scheduled progress and the actual progress of a project. It quantifies whether the project is ahead of or behind schedule.
Formula: SV = Earned Value (EV) – Planned Value (PV)
Interpretation:
- If SV is positive, it means the project is ahead of schedule, indicating that work is being completed faster than planned.
- If SV is negative, it means the project is behind schedule, indicating delays in project progress.
- If SV is zero, the project is exactly on schedule.
Earned Value (EV):
- Earned Value represents the value of the work completed at a specific point in time. It is typically measured in monetary terms and reflects the budgeted cost of the work that has been accomplished.
Planned Value (PV):
- Planned Value is the budgeted cost of the work that was planned to be completed at a specific point in time. It represents the planned project progress at that time.
Actual Cost (AC):
- Actual Cost is the actual cost incurred in executing the project up to a specific point in time. It reflects the actual expenses associated with project activities.
CV and SV are essential tools for project managers to monitor project health. Positive values for both CV and SV are generally desirable, as they indicate cost savings and schedule acceleration. However, negative values for either or both metrics signal potential issues that need attention and corrective actions. Project managers should regularly calculate and review these metrics to make informed decisions and take steps to keep the project on track.
