Responding to Variances

It is not enough to simply detect a variance. The next step is to understand what it means and what caused it. Then you have to decide what to do to correct for the deviation. Earlier I explained that there are four responses that can be taken when there is a deviation from plan. Which of these you choose will depend in part on what caused the deviation. Following are some general guidelines:

• When ACWP and BCWP are almost equal and larger than BCWS (see Figure 9-5), it usually means that extra resources have been applied to the project, but at the labor rates originally anticipated. This can happen in several ways. Perhaps you planned for weather delays, but the weather has been good and you have gotten more work done during the analysis period than intended, but at the correct cost. Thus, you are ahead of schedule but spending correctly.

• When ACWP and BCWP are nearly equal and below BCWS (see Figure 9-6), it usually means the opposite of the previous situation; that is, you have not applied enough resources. Perhaps they were stolen from you, perhaps it has rained more than you expected, or perhaps everyone has decided to take a vacation at once. The problem with being in this position is that it usually results in an overspend when you try to catch up.

• When ACWP is below BCWS and BCWP is above BCWS (see Figure 9-7), you are ahead of schedule and underspent. This generally happens because the original estimate was too conservative (probably padded for safety). Another possibility is that you had a lucky break. You thought the work would be harder than it was, so you were able to get ahead. Sometimes it happens because people were much more efficient than expected. The problem with this variance is that it ties up resources that could be used on other projects. The economists call this an opportunity cost. There is also a good chance that if you were consistently padding estimates and were bidding against other companies on projects, you probably lost some bids. If your competitor is using average values for time estimates while you are padding yours, then your figures are likely to be higher, and you will lose the bid.