Skip to main content

Variance analysis

Short answer

Variance analysis compares actual performance (cost, schedule) against baselines, computing cost variance (EV minus AC) and schedule variance (EV minus PV). Positive CV indicates under budget, positive SV ahead of schedule. It identifies causes and triggers corrective actions.

What do you mean by variance analysis?

Variance analysis is the technique of comparing the actual results of the project with the planned (baseline) values to find the difference (variance), determine the cause and decide on corrective action. It is used in scope, schedule and cost control, and is a central part of earned value management.

Types of variance

  1. Cost variance (CV) = EV − AC (or Budget − Actual).
  2. Schedule variance (SV) = EV − PV.
  3. Scope variance: difference between the baseline scope and delivered scope.
  4. Time variance: planned versus actual dates.
  5. Variance at completion (VAC) = BAC − EAC.

Interpretation:

ValueCostSchedule
PositiveUnder budgetAhead of schedule
ZeroOn budgetOn schedule
NegativeOver budgetBehind schedule

Percentage variance: CV% = CV/EV × 100.

Steps

  1. Establish the baseline.
  2. Measure actual performance.
  3. Calculate the variances.
  4. Investigate the cause (poor estimate, scope change, productivity, price changes).
  5. Decide if the variance is within threshold (e.g. ±10%).
  6. Recommend corrective/preventive action or change request.
  7. Report and update the forecasts.

Example

Planned cost of design = Rs 2,00,000, EV = Rs 1,80,000, AC = Rs 2,20,000. CV = 1,80,000 − 2,20,000 = −40,000, so over budget by Rs 40,000 (−22%). CPI = 0.82.

Baseline --compare--> Actual --> Variance
   Variance > threshold? -> Cause -> Action

Importance

Gives early warning, supports decisions and improves estimates for future projects. Variance without cause analysis is not useful.

✓ Answer checked by Claude Opus 5.5 (high effort)

Related questions

All ICT Project Management chapter 9 questions →