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Cost Variance (CV)

APMT 022

DAU GLOSSARY DEFINITION

Alternate Definition

Cost Variance (CV) is a metric for showing cost performance derived from earned value data. It is the mathematical difference between Budgeted Cost for Work Performed (BCWP) and Actual Cost of Work Performed (ACWP). A positive value indicates a favorable condition and a negative value indicates an unfavorable condition. It may be expressed as a value for a specific period of time or cumulative to date.
Source: DoD Earned Value Management System Interpretation Guide (EVMSIG)

Alternate Definition Source

DoD Earned Value Management System Interpretation Guide (EVMSIG)

General Information

The cost variance (CV) is computed by subtracting the Actual Cost of Work Performed (ACWP) from the corresponding Budgeted Cost for Work Performed (BCWP). Negative cost variances are unfavorable indicating that more money was spent to complete a task than was budgeted for the task. Positive cost variances are favorable indicating that work was completed under budget. Early unfavorable cost variances are a strong indicator of potential contract overruns. Cost variance often lags schedule variance and unlike schedule variance does not improve as the contract nears completion. A plain language definition for a negative $10K cost variance, is that ten thousand dollars more was spent to complete the work than was budgeted for the work.

 

CV = BCWP - ACWP

If BCWP > ACWP, then CV will be Positive/Favorable indicating an underrun

If BCWP < ACWP, then CV will be Negative/Unfavorable indicating an overrun

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