Why is CV considered more critical than SV?

Cost overruns are generally harder to recover from than schedule delays. A negative CV often indicates a systemic problem that will persist through project completion.

What does a CV of zero mean?

A CV of zero means the project is spending exactly what was budgeted for the work completed. The project is on budget.

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Cost Variance (CV)

Cost Variance (CV) is an EVM metric that measures cost performance as the difference between earned value and actual cost: CV = EV - AC.

Explanation

Cost Variance indicates whether the project is over or under budget for the work completed. A positive CV means the project has spent less than budgeted for the work accomplished, indicating the project is under budget. A negative CV means the project has spent more than budgeted, indicating it is over budget. A CV of zero means the project is exactly on budget.

The formula is CV = EV - AC. For example, if EV = $45,000 and AC = $50,000, then CV = -$5,000, meaning the project is $5,000 over budget for the work completed.

Unlike SV, CV does not converge to zero at project completion. It remains a valid indicator of cumulative cost performance throughout the entire project and at project close. A negative CV at completion indicates the project finished over budget. CV is considered one of the most important EVM metrics because cost variances are typically difficult to recover from later in the project.

Key Points

•Formula: CV = EV - AC
•Positive CV = under budget; negative CV = over budget
•Does not converge to zero at project completion (unlike SV)
•Considered a critical indicator because cost overruns are hard to recover

Exam Tip

CV = EV - AC. Positive is good (under budget). Unlike SV, CV remains meaningful at project end. A negative CV at completion means the project finished over budget.

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