The process of computing the ratio of the remaining work to the remaining budget provides a valuable performance indicator for project management. For example, a value of 1.0 suggests the project is on budget, while a value less than 1.0 indicates a potential cost overrun, and a value greater than 1.0 suggests the project is currently under budget. This metric is typically calculated by dividing the budget at completion minus the actual cost by the budget at completion minus the planned value.
This performance measurement allows project managers to assess cost performance trends and predict future outcomes, enabling informed decision-making regarding resource allocation and corrective actions. Historically, such proactive performance monitoring has been crucial for successful project delivery, especially in complex and resource-intensive endeavors. It helps identify emerging cost issues early on, allowing for timely intervention and increasing the likelihood of staying within budget constraints.
