Variance Analysis is a technique for determining the cause and degree of difference between the baseline and actual performance.
It compares planned values with actual results to assess the magnitude and significance of deviations in cost, schedule, or scope. Variance analysis helps project teams identify trends, determine root causes, and decide whether corrective or preventive actions are needed.
Key Characteristics
- Comparative Technique – Examines actual performance against the baseline
- Cause-Oriented – Focuses on understanding why a deviation occurred
- Quantifies Differences – Measures both the size and direction of the variance
- Used Across Performance Areas – Commonly applied to cost, schedule, and scope metrics
Example Scenarios
- Analyzing a negative cost variance to find unexpected labor rate increases
- Investigating schedule variance due to delayed approvals or resource constraints
- Assessing variance at completion (VAC) to determine projected budget overrun
Role in Project Monitoring and Control
- Improves Transparency – Makes deviations visible and traceable
- Supports Corrective Action – Informs decisions to recover performance
- Feeds Forecasting – Helps refine estimates like EAC and TCPI
- Enhances Stakeholder Communication – Provides clear rationale for changes
See also: Cost Variance (CV), Schedule Variance (SV), Variance at Completion (VAC), To-Complete Performance Index (TCPI), Performance Measurement Baseline.