Cost Variance

(EVM) will be used to perform the measuring and controlling of the project costs.
The Project Manager and Project Sponsor will review the following earned value measurements:
1. Schedule Variance (SV)
2. Cost Variance (CV)
3. Schedule Performance Index (SPI)
4. Cost Performance Index (CPI)
5. To Complete Cost Performance Index (TCPI)
6. Estimated Actual Cost at Completion (EAC)

Schedule Variance (SV) is a measurement of the schedule performance for a project, and is calculated by subtracting the Planned Value (PV) from Earned Value (EV). EV is the actual value earned in the project, and PV is the value the project schedule tool indicates should have been earned at the measurement point. Subtracting PV from EV provides a measurement to
CV is calculated by subtracting Actual Costs (AC) from EV. EV is the actual value earned in the project. AC represents actual costs incurred to date. Subtracting AC from EV provides a measurement to indicate the status of the project as it relates to budget and cost.
• If CV is zero, the project is considered to be on budget.
• If CV is greater than zero, the project is earning more value than planned and is considered to be under budget.
• If CV is less than zero, the project is earning less value and is considered to be over budget.

Schedule Performance Index (SPI) is a measurement of the progress achieved against that which was planned. SPI is calculated as EV/PV. If EV is equal to PV the value of the SPI is 1.
• If EV is less than the PV then the value is less than 1, which means the project is behind schedule.
• If EV is greater than the PV the value of the SPI is greater than one, which means the project is ahead of schedule.
• A well performing project should have its SPI as close to 1 as possible.

Cost Performance Index (CPI) measures the value of the work completed compared to the actual cost of the work completed. CPI is calculated as
• If CPI is less than 1, the project is considered to be over budget.

To Complete Performance Index (TCPI) measures the efficiency at which resources on the project should be utilized for the remainder of the project. TCPI is calculated as (Total Project Budget – EV)/(Total Project Budget – AC).
• If TCPI is equal to 1, the utilization of resources on the project can continue at the current level.
• If TCPI is greater than 1, the utilization of resources on the project should be more controlled than the current level.
• If TCPI is less than 1, the utilization of resources on the project can be more lenient than at the current level.

Estimated Actual Cost at Completion (EAC) provides a forecast of actual cost to complete the project based on the cost performance. There are three ways to calculate EAC:
• Actual Cost plus Total Project Budget (TPB) minus Earned Value (AC + TPB – EV).
• Total Project Budget divided by Cost Performance Index (TPB/CPI).
• Actual Cost plus the result of dividing the difference between the Total Project Budget and Earned Value by the product of Cost Performance Index and Schedule Performance Index (AC + ((TPB –