Definition: Variance at Completion (VAC) is the expected cost underrun or overrun at the project’s end. It is the difference between the old and new budget, i.e., Budget at Completion (BAC) and Estimate at Completion (EAC).
A negative VAC shows the project has an expected overrun, and a positive VAC shows the project is expected to be within the budget.
For example, a result of –5,000 USD shows that the project forecasts a 5,000 USD overrun.
VAC is a project budget deficit or budget surplus. The ideal VAC value is zero.
Variance at Completion (VAC) Formula
Variance at Completion = Budget at Completion – Estimate at Completion
VAC = BAC – EAC
The Budget at Completion is the approved project budget.
The Estimate at Completion is the expected project cost at the end.
Variance at Completion (VAC) Example with Calculation
Example-1
For your project, the Budget at Completion is 100,000 USD, and the Estimate at Completion is 115,000 USD. Calculate the Variance at Completion.
Given in the question:
BAC = 100,000 USD
EAC = 115,000 USD
We know that
VAC = BAC – EAC
= 100,000 – 115,000
= –15,000 USD
Since the VAC is negative, the project is expected to be over budget by 15,000 USD.
Example-1
For your project, the Budget at Completion is 115,000 USD, and the Estimate at Completion is 100,000 USD. Calculate the Variance at Completion.
Given in the question:
BAC = 115,000 USD
EAC = 100,000 USD
We know that
VAC = BAC – EAC
= 115,000 – 100,000
= 15,000 USD
Since the VAC is positive, the project is expected to be under budget by 15,000 USD.
VAC Vs CV
Please note that the Variance at Completion is different from the cost variance. Variance at Completion is the expected cost overrun when the project ends, while the CV is an exact cost overrun or underrun at any given moment.
The VAC is the future project cost variance.
Summary
Variance at Completion indicates how much the project will be under or over budget. It provides this indication in terms of dollars. Ideally, the VAC value should be zero.
I am Mohammad Fahad Usmani, B.E. PMP, PMI-RMP. I have been blogging on project management topics since 2011. To date, thousands of professionals have passed the PMP exam using my resources.