Ideally, we could measure budget and schedule in the same units. And, ideally, it would be in dollars since in the end we are interested in costs. It turns out that if we can determine a value for the task, we can frame everything in terms of dollars.

"Value" is a tricky word that can mean different things, but for now let's just think of value as equivalent to "planned cost," meaning the amount we are willing to pay for it (which represents its value to us). So, since we have already agreed on a method for determining percent complete, and since we just said the task has value, our progress can easily be framed in dollars by multiplying the value of the task by its percent complete.

The *planned value* of the "Write test cases" task is therefore 8 hours X $100/hour = $800. So, the written test cases are worth $800 to us. This is called Budgeted Cost of Work Scheduled, so BCWS = $800 for this task. Planned value, or BCWS, is also called earned value.

The *actual value* of the test cases is so far zero, since we are not yet in possession of the test cases. Our task is 0% complete so the value delivered for the work performed is $800 X 0% = $0. This is known as Budgeted Cost of Work Performed, so BCWP = $0.

However, we have incurred a cost, even though we didn't receive any value for our money. The Actual Cost of Work Performed is therefore: ACWP = 8 hours X $100/hour = $800.

By identifying planned value, earned value, and actual cost of the task, we are now able to put a dollar value on both schedule and cost variance.

To obtain the schedule variance, we can compare planned value against planned cost. A negative value means that the project is behind schedule. In our example, Schedule Variance = Actual Value - Planned Value = BCWP - BCWS = $0 - $800 = $-800.

We can also compare planned value with the actual cost to obtain the cost variance. A negative variance means the project is over budget. Cost Variance = Planned Value - Actual Cost = BCWS - ACWS = $800 - $800 = $0.

So the project appears on budget, but behind schedule. The cost variance will appear as soon as we start doing more work, as we must since we haven't delivered the test cases yet.

Let's say that the analyst takes another two hours before delivering the approved written test cases as agreed. That's an additional cost of 2 hours X $100/hour = $200. Now the task is 100% complete, so we can recalculate our budget and schedule standing.

SV = BCWP - BCWS = $800 - $800 = $0

CV = BCWS - ACWS = $800 - $1,000 = $-200

Notice that the schedule variance is now zero. This is an important point. SV will go to zero when the task is complete, even though it may have been late. You will see the negative impact on successor tasks, but it could be deceptive on a project status report.

Meanwhile, the more straightforward cost variance shows the project is over budet.

Next time: Tracking Physical Percent Complete with MS Project