The project manager must know if the project is on schedule and within the budget. The difference between planned and actual progress is the variance. The schedule variance (SV) is the difference between the earned value (EV) and the planned value (PV). Expressed as a formula, SV = EV − PV. If less value has been earned than was planned, the sched ule variance is negative, which means the project is behind schedule.
Example: Schedule Variance on John’s Move
Planning for John’s move calls for spending $261.65 by day six, which is the planned value (PV). The difference between the planned value and the earned value is the scheduled variance (SV). The formula is SV = EV − PV. In this example, SV = $162.10 − $261.65 = ($99.55) A negative SV indicates the project is behind schedule.
The difference between the earned value (EV) and the actual cost (AC) is the cost variance (CV). Expressed as a formula, CV = EV – AC. A positive CV indicates the project is under budget.
Example: Cost Variance on John’s Move
The difference between the earned value of $162.10 and the actual cost of $154.50 is the cost variance (CV). The formula is CV = EV − AC. In this example, CV = $162.10 − $154.50 = $7.60.
Variance Indexes for Schedule and Cost
The schedule variance and the cost variance provide the amount by which the spending is behind (or ahead of) schedule and the amount by which a project is exceeding (or not fully using) its budget. They do not give an idea of how these amounts compare with the total budget.
The ratio of earned value to planned value gives an indication of how much of the project is completed. This ratio is the schedule performance index (SPI). The formula is SPI = EV/PV. In the John’s move example, the SPI equals 0.62 (SPI = $162.10/$261.65 = 0.62) An SPI value less than 1 indicates the project is behind schedule.
The ratio of the earned value to the actual cost is the cost performance index (CPI). The formula is CPI = EV/ AC.
Example: Cost Performance Index of John’s Move
In the John’s move example, CPI = $162.10/$154.50 = 1.05. A value greater than 1 indicates that the project is under budget.
The cost variance of positive $7.60 and the CPI value of 1.05 tell John that he is getting more value for his money than planned for the tasks scheduled by day six. The schedule variance (SV) of negative $99.55 and the schedule performance index (SPI) of 0.62 tell him that he is behind schedule in adding value to the project (Figure 12.7 Schedule Variance and Cost Variance ).
During the project, the manager can evaluate the schedule using the schedule variance (SV) and the schedule performance index (SPI), and the budget using the cost variance (CV) and the cost performance index (CPI).
- 2361 reads
