Schedule Variance (SV) and Cost Variance (CV) in Project Cost Management

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.

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 elements: 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)

It is imperative for you to keep your project on schedule and Schedule Variance helps you complete on time. It enables you to avoid unnecessary cost overruns due to 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.

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 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

 

= 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 the 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 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 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.

 

Given in the question:

 

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, 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 posts:

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Speak Your Mind

    • Hello Motenbang,

      The questions says the duration of project is 12 months, the budget is 100,000 USD and six months have passed. Since the PV is not given in the question, you will assume that the budget is evenly distributed and since 50% of the time is passed, PV will be 50%.

  • Hello Fahad,

    Thank you for the PMP blog. This has been very helpful and is easy to understand.

    While going through the Project Budget formula under Cost Management and the EVM formulae from the Formula guide I got confused with the Planned Value, BAC, Cost Baseline and Project Budget.

    Project Budget = Cost Baseline + Management Reserve

    I understand that:
    BAC = Total Planned Value (without Management Reserve)

    Now Cost Baseline = Project Cost + Contingency Reserve

    However, in the guide, I see the following statement:
    “The project budget is also known as the Budget at Completion and denoted by BAC.”

    So how is Project Budget the same as BAC as BAC does not include Management Reserve?

    Should BAC = Cost Baseline?

    Appreciate your feedback.

    thank you,
    Mukund

  • Hello Fahad,

    Request to let know the difference between control account and Performance Measurement Baseline. As per definition it seems near same. is both of them same?

    Thank you
    Mehul Parekh

    • As per the PMBOK Guide, A control account is a management control point where scope, budget, actual cost, and schedule are integrated and compared to earned value for performance measurement.

      While schedule and cost baselines are performance measure baselines.

  • How to calculate the Schedule variance in % using dates?

    Can I showcase it as per below formulae in Completion report

    Schedule Variance = (Actual days – Planned days)/Planned days

    Is it correct?

  • Which aspect should we improve normally if a project is OVER BUDGET and BEHIND OF SCHEDULE?
    Kindly share some viewpoints on this matter. Thank you.

    • In this case you will need to find the exact cause of it. If there is problem with project plan or any unidentified risk has occurred caused you delay in schedule and cost.

      Based on the issue, you will take corrective action.

  • In MS Project when you have used a rate to define a schedule cost and the task is completed ahead of time how do you factor this in as this will mean less cost calculated.

    • It will be added to the float. However, if the activity is on critical path and many activities are completing before actual completing time, you need to review the schedule.

  • Hello Fahad,

    Many thanks for the good work you are doing.

    Please can you take a look at this question i found at one of your recommended links to the pool of pmp questions.

    On your current project, EV = $45,000, AC = $50,000, PV = $40,000. What is the schedule variance as a percentage of the work accomplished at this point in time?

    Suggested solution

    the formula for schedule variance is SV = EV – PV. Therefore the schedule variance as a percentage of the work accomplished is PV/EV or +88.8%

    Link to the question.

    http://edwel.com/Free-Resources/PMP-Certification-Final-Exam.aspx

    It is question number 2

    • Earned Value is 45,000 USD and Planned Value is 40,000 USD.

      So the schedule variance will be 1.125.

      No idea why did they take inverse of it and come up with 88%.

      I suggest you can contact them and if you get a reply, please update here as well.

  • In the 1st question, how did you arrive at PV = 50% of 100,000$ in six months? its not necessary that planned value (PV) is uniformly distributed over the period.

    • You are right. However if this data is not given in the question, you can safely assume that it is evenly distributed in each month.

  • Can anyone explain me this scenario.

    Planned Star Date = 1 March 2013
    Planned End Date = 10 March 2013
    Actual Start Date = 5 March 2013
    Actual End Date = 15 March 2013

    In both condition the time taken in 10 days only, but will this be considered in Schedule Variance as we have delayed the delivery? Kindly provide a concrete solution.

  • I had come to the conclusion of ‘A’. Unfortunately the correct answer was “C”. Following was the given explanation :

    Remember, for variances, negative is bad. In this situation, both the variances are negative. To answer the question, first look at which of the four choices exhibit negative variances for both cost and schedule. Since the project underspent because all work was not completed, but overspent for work that was done, both the cost and schedule variances are negative.

    • I miscalculated it.

      Please find the correct calculation as follows:

      Cost Variance is lower than the Schedule Variance; i.e.

      ‘CV < SV' 'EV - AC PV’

      Hence, A can not be correct. C is the correct answer.

      Sorry for giving you wrong answer.

      (Anyway, if the Cost Variance would have been more than the Schedule Variance then “A” was the correct answer.)

      • I just noticed that content of this comment is not appearing as I have written. Some texts are gone missing causing it confusing.

        I tried to correct it but failed; therefore, I am posting this comment again at the bottom of this post. Please go there and find the correct explanation.

    • Hey Ravindra,

      if you have the correct response for an answer but you do not understand it, I think the clean way to act is to make the open consult of your doubt providing with the complete information to the expert.

      Please, let me know if you agree, thank you.

      Arturo

    • Can you please elaborate on how answer is C. I understood the calculation but am not able to apply the same to these set of choices. I am not able to understand how we chose C based on equation AC > PV.

      Also i am unable to understand these choices including choice C. Can these choices be explained a little in detail please.

  • As per your first statement, both variances are negative, it means your project is over budget and you are behind your schedule.

    Now come to second point.

    Cost Variance is lower than Schedule Variance; i.e.

    CV < SV EV - PV < EV - AC - PV < - AC AC < PV It means that Actual Cost is less than the Planned Cost. Now we can say that, project is behind the schedule or taking longer time than than expected and actual costs were lower than the planned cost. Therefore, in your given option, I think that 'A' is correct answer.

    • hi,

      you have interchanged the formula for CV and SV

      CV = EV- AC
      SV = EV-PV

      Cost Variance is lower than Schedule Variance; i.e.

      CV < SV
      EV-AC < EV-PV
      -AC<-PV
      PV<AC

      planned value is less than actual cost so the answer should be B

      • Hello Tejal,

        There was some error with the commenting system causing signs to appear wrongly, that is why I have written this comment again, just after the end of the blog post. You can check it at the end of this blog post.

      • I dont think that at completion SV = 0, in your example, at month 6, 40% of the work was done but it should be 50%, so we got SV = -10,000.
        What would happen if at month 9, 100% of the work was completed? EV=100,000 and PV=75,000 then SV = 25,000 at completion!
        Also if at month 12 only 70% of the work is done, we’ll have PV= 100,000 and EV=70,000 then SV=-30,000!

        Could you please clarify?

        (would I receive an email with the answer? or do I have to come here everyday?)

        • Once the project is completed, this mean all planned value has been earned,

          i.e. EV = PV

          The rest you can calculate with substituting data in the formula.

          • Dear Fahad,

            I have a query here. Why will EV be = to PV. Planned Value is what we expected & Earned is what has happened. So in the 1st example where 100% work is done in 9 months, EV is 100000 but since we planned to complete 75%, PV is 75000. So SV = 25000 which means as put forth in theory we have completed project ahead of schedule & months wise we have saved 3 months. At the same time it means we have not really calculated well since we considered 3 more months for completion. Ideal scenario would have been if we would have completed this work in 12 months. EV would have been equal to PV then. Isn’t this the way it should be.

            EV can’t be equal to PV in most cases and that is what we intend to find. This 25000 gives us that clarity. So why should we have EV = PV if project has been completely done or why is that even really required. Planned value has been earned since Planned is less than Earned here but the purpose is to find the issue & then target why there was a variation. So why compel EV to be equal to PV when ideally it is +ve.

            Like if it would have been reverse eg :EV = 90000 in 12th month but PV = 120000. Then we would say SV = -30000 which would have meant we are behind schedule & would take 2-3 months more to finish the project.

            Can you please guide !!

            Regards,
            Reshma

            • When the project end how much value is remain to be earned? Nothing, this means all project work is complete and everything is earned. That is why when the project ends, EV = PV.

                • He is correct. Earned value is derived from how much work was actually completed. $100 task, 40% complete = $40 EV.

                  So while SV looks like currency, it is really just an evaluation on how far along you are in a task / project versus what you planned at any given time. The AC will almost NEVER = PV

        • SV must equal 0 upon completion regardless of the where the budget is.
          What you are all missing is you can’t achieve 110%.
          If the project has completed all tasks, the project is complete.
          Fahad is correct.

    • my question is on the effect of CV. The blog says is CV > 1 then its Under Budget. Lets see if the below makes sense:

      BAC (Total Budget) = 10,000 USD.
      As of now the project is completed with a total cost of 9,000 USD. So AC = 9,000.
      Since 100% of work is completed, EV = (100%) * BAC = BAC = 10,000

      CV = EV – AC = 1,000. In layman terms, I budgeted for 10,000 and finished the wok in 9,000 which is good and I save 1,000. Shouldn’t this mean, my Budget Estimate was more than the actual. And so if CV > 1 is actually good.

      Sorry, somehow, I am unable to digest how the CV > 1 is not always good and means under budget

      • Technically speaking, an under budget project (CV>1) is a good thing. But, as a planner, it is a bad thing that you kept more budget for a project which actually costed less. In this way, you are actually showing bad estimation and planning capability.

        Besides, you have to understand that under budget or over budget is the status of the project at that certain point of evaluation of status. If you are saving a thousand dollars from a project, it is a good thing for the sponsor but bad thing for you as a person who keeps his estimates on a higher end with too much buffer.

    • Pretty useful. I have never seen previously scary arithmetic concepts made so simple. Indeed simply demystefied

      Thanks. I doff my hat.

      And come to think of it? Its free and I have paid a lot of money to learn these concepts at the Masters Level?

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