What is the significance of Variance at Completion (VAC)?

The significance of Variance at Completion (VAC) lies in its ability to provide insights into a project's financial health at its completion. VAC is calculated as the difference between the Budget at Completion (BAC)—the total budgeted cost for the project—and the Estimate at Completion (EAC)—the forecasted total cost based on current performance.

When VAC is positive, it indicates that the project is expected to be completed under budget, signifying effective cost management and resource utilization. Conversely, a negative VAC suggests that costs are overrunning, which can signal issues that need to be addressed to bring the project back on track.

Understanding VAC is crucial for project managers as it enables them to communicate financial statuses to stakeholders and make informed decisions regarding resource allocation, potential risk management measures, and budget adjustments. This metric not only reflects the project's current state but also aids in budgeting accuracy and the overall assessment of project success.