Cost Variance (CV) indicates how much over or under budget the project is. It’s used by the program manager and program personnel to determine how best to utilize their remaining resources. It can contain 4 different CV methods.
- Cost Variance
- Cost Variance %
- Cost Performance Indicator (CPI)
- To Complete Cost Performance Indicator (TCPI)
1. Cost Variance (CV)
Cost Variance can be calculated as using the following formulas:
- Cost Variance (CV) = Earned Value (EV) – Actual Cost (AC)
- Cost Variance (CV) = BCWP – ACWP
Cost Variance indicates how much over or under budget the project is in terms of percentage.
- Positive = indicates how much under budget the project
- Negative = indicates how much over budget the project
2. Cost Variance %
Cost Variance % can be calculated as using the following formula:
- CV % = Cost Variance (CV) / Earned Value (EV)
- CV % = CV / BCWP
Cost Variance % indicates how much over or under budget the project is in terms of percentage.
- Positive % = indicates how much under budget the project is in terms of percentage
- Negative % = indicates how much over budget the project is in terms of percentage
3. Cost Performance Indicator (CPI)
Cost Performance Indicator can be calculated as using the following formulas:
- CPI = Earned Value (EV) /Actual Cost (AC)
- CPI = BCWP / ACWP
CPI is an index showing the efficiency of the utilization of the resources on the project.
- Greater than (≥) 1 indicates efficiency in utilizing the resources allocated to the project is good.
- Less than (≤) 1: indicates efficiency in utilizing the resources allocated to the project is not good.
4. To Complete Cost Performance Indicator (TCPI)
To Complete Cost Performance Indicator (TCPI) can be calculated using the following formulas:
- TCPI = ( Total Budget – EV ) / ( Total Budget – AC )
- TCPI = ( Total Budget – BCWP ) / ( Total Budget – ACWP)
TCPI is an index showing the efficiency at which the resources on the project should be utilized for the remainder of the project. If the results are:
- Greater than (≥) 1: indicates utilization of the project team for the remainder of the project can be stringent.
- Less than (≤) 1: indicates utilization of the project team for the remainder of the project should be lenient.
– BCWP = Budgeted Cost of Work Performed
– ACWP = Actual Cost of Work Performed
– AC = Actual Cost
AcqLinks and References:
- Defense Acquisition Guidebook (DAG)
- DoD Earned Value Management Interpretation Guide – Jan 2018
- EVM Contract Requirements Checklist
- DAU EVM Gold Card
- DOE EVMS Gold Card
Updated: 6/15/2018
