Planned Versus Actual Cost
This metric compares the actual cost of software delivery with the project budget.
Main Description

Purpose

Planned versus Actual Cost measures whether the team delivered at a lower cost than estimated or not. This information can help determine the profitability or return on investment of the project. It is the key indicator of cost performance for a particular project upon completion.

When cost overruns occur, analyze the data to determine whether process improvements are needed to enable better estimation or more efficient delivery for future projects.


Definition

Planned Versus Actual Cost = Budget at Completion - Actual Cost of Work Performed

where:

  • Budget at Completion = Target amount planned to be spent for the project
  • Actual Cost of Work Performed = Actual costs incurred in completing the project

Cost can be measured in dollars or effort (person-hours). This metric can also be calculated as a percentage index.


Analysis

If costs for the project were higher than planned, the team should perform analysis to uncover causes of the overrage.

The following factors can result in cost overruns:

  • Poorly defined scope or poorly managed scope
  • Ineffective requirements elicitation
  • Poor estimates
  • Poor risk management
  • Lack of focus on quality in early stages of the project
  • Lack of stakeholder collaboration and team collaboration

The team should focus on appropriate process improvements for better cost performance.

Actual costs that are lower than planned are a good sign. However, investigation is still needed to improve future predictability. When costs are lower than planned, the team consults with stakeholders to determine what actions might be taken in response to the lower than expected costs. For example:

  • add needed additional functionality to add more value to the release
  • release the product early
  • spend more on the testing effort to increase quality
  • improve the usability or performance of the system
  • save the cost to increase future profits

This metric can be rolled up to the organizational level to view cost trends across multiple projects.

Frequency and reporting

Actual cost is calculated after the software has been shipped for comparison with the project budget.


Collection and reporting tools

Cost data is collected in IBM® Rational® Project Conductor®. IBM® Rational® Insight® reports on this metric at the executive level.


Pitfalls, advice, and countermeasures

Use the Planned Versus Actual Effort and Cost per Unit of Work metrics to track cost performance during the lifecycle. This helps the team understand if they are burning budget at an acceptable rate during the project.