Variance at Completion (VAC)
Variance at Completion (VAC) is an important predictive metric in Earned Value Management (EVM) that forecasts the anticipated budget variance upon the project's completion. It is calculated using the formula **VAC = BAC - EAC**, where **BAC** is Budget at Completion, representing the total budgeted cost for the project, and **EAC** is Estimate at Completion, which is the current projection of the total cost to complete the project based on performance to date. A positive VAC indicates that the project is expected to be under budget at completion, suggesting cost efficiencies or savings that have been realized or are anticipated to continue. This could be due to cost-saving initiatives, lower-than-expected expenses, or increased productivity. Conversely, a negative VAC signals that the project is projected to exceed its budget, highlighting potential financial overruns that need to be addressed. Such overruns may arise from scope changes, cost escalations, delays, or unanticipated expenditures. VAC is vital for long-term financial planning and resource management, providing stakeholders with foresight into the project's financial trajectory. It allows project managers to evaluate whether the current cost performance is sustainable and to make strategic decisions such as adjusting project scopes, negotiating additional funding, or implementing cost-control measures. Monitoring VAC helps in aligning expectations among stakeholders and in making informed decisions to ensure the project's financial objectives are met. Interpreting VAC accurately requires a realistic assessment of future project performance and consideration of all factors that could influence costs moving forward. It should be used in conjunction with other EVM metrics like Cost Performance Index (CPI) and Schedule Performance Index (SPI) for a comprehensive analysis. By effectively utilizing VAC, project managers can proactively manage financial risks and guide the project towards successful and cost-effective completion.
PMI-SP - Variance Analysis Example Questions
Test your knowledge of Amazon Simple Storage Service (S3)
Question 1
How does a positive Variance at Completion (VAC) value influence project performance analysis?
Question 2
What statement best describes Variance at Completion (VAC) in project scheduling?
Question 3
What indicates a favorable VAC (Variance at Completion) trend during project execution?
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