2.8.1        Variance Reports

Threshold Management is based on
an offset that is linked to Schedule Variance and Cost Variance. When SV and/or
CV exceeds its threshold, formal Variance Reports need to be prepared. The
following are examples of variance reports:

 

2.8.1.1       Schedule Variance

Schedule Variance (SV) is
the difference between Earned Value (EV) and the Planned Value (PV) or the
difference between work performed and the work scheduled. A positive value is a
favourable position.

·        
Calculation:
SV = EV – PV

·        
Positive
SV = more work has been accomplished than scheduled.

·        
Negative
SV = less work completed than planned.

 

2.8.1.2       
Cost Variance

Cost Variance (CV) is the
difference between the Earned Value and the Actual Costs or the difference
between Budgeted Cost of Work Performed (BCWP) and Actual Cost of Work
Performed (ACWP). A positive value is a favourable position.

·        
Calculation:
CV = EV – AC

·        
Positive
CV = the work accomplished cost less than budgeted.

·        
Negative
CV = the work accomplished cost more than budgeted.

2.9  Analysis and
Management Reports

To identify significant variances, project
thresholds (based on SV and CV) are agreed and setup on a project.

Identify, at least monthly, the significant
variances (differences between both planned and actual schedule performance,
and planned and actual cost performance), which are higher than agreed
thresholds. Explanations and corrective actions are provided for the significant
variances by Discipline Project Manager or Package Engineers.

Comparing the earned value to the planned value
during a given period provides a valuable indication of schedule status in
terms of work accomplished. However, this schedule variance (SV) may not
clearly indicate whether scheduled milestones are being met, since some work
may have been performed out of sequence or ahead of schedule, while other work
has been delayed. Schedule Variance alone does not indicate whether a completed
activity is a critical event or if (or by how much) delays in an activity’s
completion will affect the completion date of the project.

A formal project schedule will provide the means
for clearly determining the status of specific control accounts (or lower-level
work packages), milestones, and critical events. Schedule analysis will
consider the time
impact to the schedule plan when a significant variance exists. By considering
the time impact for each significant variance, a true and representative impact
to the schedule plan is quantified.

Comparing
the earned value to the actual cost of that work provides a valuable indication
of the cost efficiency of work accomplished. This cost variance (CV) provides
management an indicator of actual cost problems and may be trended to see
future cost impacts. Only variances that have a significant impact (higher than
threshold) should be analysed in detail.