What is cost variance in agency project management?

Cost variance definition

Cost variance (CV) in the context of agency project management refers to the quantitative difference between the actual cost of the project and the budgeted or planned cost at a specific point in time. It provides a vital measure of how the financial performance of the project is aligning with the initially established budget. A positive cost variance indicates that the project is under budget, while a negative cost variance shows that the project is over budget. 

Understanding cost variance is crucial for agencies as it helps in identifying areas that may require corrective actions, offering insights into the project's financial health, and ensuring that the project stays on track financially. Monitoring cost variance enables agencies to make timely decisions, optimize resource allocation, and maintain client trust by delivering projects within the budget constraints.

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Cost variance formula

The cost variance is calculated using the following formula:

CV = EV - AC


CV = Cost variance

EV = Earned value (the value of the work completed up to the current point)

AC = Actual cost (the actual expenses incurred for the work performed)

By applying this formula, project managers can quantify the difference between what has been accomplished and what has been spent, providing a clear picture of the project's financial status.


Suppose a project has an Earned Value (EV) of $10,000, representing the value of the work completed, and the Actual Cost (AC) of the work performed is $9,000. The cost variance can be calculated as:

CV = $10,000 − $9,000 = $1,000

In this case, the positive cost variance of $1,000 indicates that the project is currently under budget.

Platforms like can assist agencies in tracking and analyzing cost variance effortlessly, integrating it into the overall project management process. By utilizing such tools, agencies can gain real-time insights into their projects' cost performance and implement necessary adjustments proactively, ensuring successful project delivery within the set budget.

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