The Cost Overrun Formula
How to calculate a budget overrun in dollars and as a percentage, the Earned Value version used for forecasting before a project finishes, and the baseline question that decides whether the number is honest.
The formula
A project budgeted at $1,000,000 that finishes at $1,250,000 has a $250,000 cost overrun, or 25%. A negative result means the project came in under budget.
Worked example
An office fit-out approved at a budget of $1,000,000 closes out at an actual cost of $1,250,000.
For a 25% overrun in context: PMI's Pulse of the Profession finds 43% of projects exceed their original budget, and transportation infrastructure overruns average far higher. See benchmark overrun rates by sector.
Four forms of the formula, and when to use each
| Form | Formula | When to use it |
|---|---|---|
| Absolute cost overrun | Overrun = Actual Cost - Budgeted Cost | The dollar amount over budget. Use for reporting the headline number. |
| Percentage cost overrun | Overrun % = (Actual - Budget) / Budget x 100 | Normalises across project sizes so you can compare and benchmark. |
| Cost Variance (EVM) | CV = EV - AC | In-flight signal: the overrun on work completed so far, before close-out. |
| Forecast overrun at completion | VAC = BAC - EAC, where EAC = BAC / CPI | Projects the final overrun from current cost efficiency (CPI). |
BAC = Budget at Completion, EAC = Estimate at Completion, EV = Earned Value, AC = Actual Cost, CPI = Cost Performance Index. The Earned Value forms let you forecast the final overrun while the project is still running. See the full EVM guide for the derivations, or run the numbers in the calculator.
The part most calculations get wrong: which budget?
The formula is trivial. The judgement is in the denominator. There are two defensible baselines, and they answer different questions:
Current approved baseline
Measures execution performance against the budget the team is currently working to. Useful for in-project control, but it resets every time the budget is formally re-baselined, which quietly absorbs prior overruns.
Decision-to-build estimate (real prices)
Measures forecasting accuracy against the number used to approve the project, adjusted to constant prices so inflation is not mistaken for overrun. This is the baseline Bent Flyvbjerg uses across the project database, precisely because revised baselines hide the true gap between promise and outcome.
Practical rule: state which baseline you used and whether figures are in real or nominal terms. A “0% overrun” against a baseline that was revised upward three times is not the same as a 0% overrun against the original estimate.
Frequently Asked Questions
What is the cost overrun formula?
Cost Overrun = Actual Cost - Budgeted Cost. As a percentage: Cost Overrun % = (Actual Cost - Budgeted Cost) / Budgeted Cost x 100. A project budgeted at $1,000,000 that finishes at $1,250,000 has a $250,000 overrun, or 25%.
How do you calculate cost overrun as a percentage?
Subtract the budgeted cost from the actual cost, divide by the budgeted cost, and multiply by 100: ($1,250,000 - $1,000,000) / $1,000,000 x 100 = 25%. A negative result means the project came in under budget.
Which budget should the overrun be measured against?
To measure execution, use the current approved baseline. To measure forecasting accuracy, use the original decision-to-build estimate in constant prices. Flyvbjerg's research uses the decision-to-build estimate, because measuring against a revised baseline hides overruns by absorbing them into successive re-budgets.
What is the difference between cost overrun and cost variance?
Cost overrun compares actual spend to budget. Cost Variance (CV) in Earned Value Management compares the budgeted value of completed work to its actual cost: CV = EV - AC. A negative CV signals an overrun on the work done so far, before the project is finished.