Navigating Project
Cost Variance
Present by – Tejasvini Bhamare
PRN - 230102311010
Navigating Project Cost
Variance
This presentation outlines project cost variance. We will explore its
causes and impacts. We will also cover proven management
strategies.
Understanding Cost Variance
Definition Importance Impact
Cost Variance (CV) is the difference CV indicates project financial health. CV affects profitability and
between budgeted cost and actual It enables informed decision- stakeholder confidence. It signals
cost. making. potential problems.
Influencing Factors
1 Scope Creep 2 Resource Issues
Uncontrolled changes Unexpected rates or
expand project shortage of resources.
boundaries. This increases This impacts budgets.
costs.
3 Estimation Errors
Inaccurate forecasts of materials or labor. This leads to
variances.
Calculating Cost Variance
EVM Framework
Earned Value Management integrates scope and
schedule data.
CV Formula
CV = Earned Value (EV) - Actual Cost (AC). This is a key
calculation.
Performance Measurement
Regular CV calculations track project performance.
Interpreting CV Results
Positive CV Negative CV
Project is under budget. Project is over budget.
Efficiency is better than Inefficiency is worse than
expected. anticipated.
Trend Analysis
Monitor CV trends over time. This predicts future performance.
Root Cause Analysis
1 Data Collection
Gather relevant financial data and project reports.
Review carefully.
2 Identify Causes
Pinpoint factors contributing to cost overruns. Use
fishbone diagrams.
3 Validate Findings
Verify root causes. Conduct interviews and perform
analyses.
Preventive Strategies
Scope Budget Planning Resource
Management Allocation
Detailed cost
Clearly define estimates and Optimize resource
project scope. contingencies. use. Monitor
Implement change Thorough planning. availability regularly.
control.
Corrective Actions
Re-Baseline
1 Reset project plan.
Negotiate
2
Reduce contract costs.
Resource Shift
3
Reassign personnel.
Real-World Examples
Construction Success Software Failure
Effective scope management prevents overruns. Poor resource planning causes budget problems.
Cost Control Tools
2 Project Software
1
Spreadsheets
BI Dashboards
3
These tools allow for detailed tracking and reporting. This information provides valuable insights. Utilize these
technologies for efficiency.