How do you handle schedule and cost variances in your work packages?

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Earned Value Management (EVM) is a project management technique that helps you measure the performance and progress of your work packages. A work package is a set of related tasks or activities that deliver a specific output or product. By comparing the planned value, earned value, and actual cost of your work packages, you can identify schedule and cost variances and take corrective actions. In this article, you will learn how to handle schedule and cost variances in your work packages using EVM.

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Anand Abhishek

Portfolio Services Manager (Assistant Vice President) at HSBC | Ex- EY & Honeywell | IIT Dhanbad | Google Project…

1 What are schedule and cost variances?

Schedule and cost variances are the differences between the planned and actual performance of your work packages. Schedule variance (SV) is the difference between the earned value (EV) and the planned value (PV) of your work packages. Cost variance (CV) is the difference between the earned value (EV) and the actual cost (AC) of your work packages. A positive variance means that you are ahead of schedule or under budget, while a negative variance means that you are behind schedule or over budget.

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Anand Abhishek

Portfolio Services Manager (Assistant Vice President) at HSBC | Ex- EY & Honeywell | IIT Dhanbad | Google Project Management Certified
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Schedule Variance (SV) measures the difference between planned and actual progress. Cost Variance (CV) measures the difference between planned and actual costs. Both indicate project performance against baselines.

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2 How to calculate schedule and cost variances?

To calculate schedule and cost variances, you need to collect and analyze the data of your work packages. You can use a spreadsheet, a software tool, or a dashboard to track and report the data. The basic formulas for schedule and cost variances are:

SV = EV - PV

CV = EV - AC

You can also calculate the schedule and cost performance indexes (SPI and CPI), which are the ratios of earned value to planned value and actual cost, respectively. The formulas for SPI and CPI are:

SPI = EV / PV

CPI = EV / AC

An index greater than 1 means that you are performing better than planned, while an index less than 1 means that you are performing worse than planned.

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Anand Abhishek

Portfolio Services Manager (Assistant Vice President) at HSBC | Ex- EY & Honeywell | IIT Dhanbad | Google Project Management Certified
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The formulas to calculate Schedule Variance (SV) and Cost Variance (CV) are as follows: Schedule Variance (SV): SV=EV?PV where: EV is the Earned Value (the value of work actually performed), PV is the Planned Value (the authorized budget for the planned work). Cost Variance (CV) CV=EV?AC where: EV is the Earned Value (the value of work actually performed), AC is the Actual Cost (the total cost incurred to complete the work)

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3 How to interpret schedule and cost variances?

Schedule and cost variances help you assess the status and health of your work packages, allowing you to determine the root causes of deviations and evaluate the impact on the project scope, time, and budget. When examining variances, it is important to consider whether they are due to internal or external factors, if they are temporary or permanent, and if they are within acceptable thresholds or tolerances. Additionally, ask yourself if the variances are affecting the quality and risk of the work packages, as well as the stakeholder expectations and satisfaction.

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Anand Abhishek

Portfolio Services Manager (Assistant Vice President) at HSBC | Ex- EY & Honeywell | IIT Dhanbad | Google Project Management Certified
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I interpret Schedule Variance (SV) by: SV > 0: Project ahead of schedule. SV < 0: Project behind schedule. Cost Variance (CV) by: CV > 0: Cost efficiency. CV < 0: Cost overrun.

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4 How to handle schedule and cost variances?

Managing schedule and cost variances necessitates proactive and reactive measures to control and improve work package performance. You should update and communicate baselines and forecasts regularly, adjust scope, schedule, or budget to meet project objectives, implement change requests, corrective actions, or preventive actions to address the variances and their causes, monitor and review work package metrics and trends using EVM tools and techniques, and document and share lessons learned and best practices.

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Anand Abhishek

Portfolio Services Manager (Assistant Vice President) at HSBC | Ex- EY & Honeywell | IIT Dhanbad | Google Project Management Certified
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As a PM, I handle schedule and cost variances by closely monitoring, analyzing root causes, adjusting plans, communicating transparently with stakeholders, implementing risk mitigation, collaborating with the team, and continuously improving project performance.

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5 How to avoid schedule and cost variances?

To avoid schedule and cost variances, it is important to plan and execute your work packages with accuracy and efficiency. You should define and decompose your work packages realistically, estimate and allocate resources and costs, assign and manage roles and responsibilities, follow quality and risk management plans, and engage and involve stakeholders and team members.

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Anand Abhishek

Portfolio Services Manager (Assistant Vice President) at HSBC | Ex- EY & Honeywell | IIT Dhanbad | Google Project Management Certified
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To avoid schedule and cost variances as a project manager: 1. Thoroughly plan and estimate. 2. Manage risks proactively. 3. Monitor progress consistently. 4. Communicate effectively. 5. Implement change control. 6. Regularly update plans.

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Umakant Reddy, PMP
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Accurate estimates and schedules are next to impossible to achieve in construction. Generally a cost and resource loaded baseline schedule are compared against the project progress. Usually scope creep and change orders should be discussed and highlighted on progress reports. Highlighting risks and methods to mitigate should be addressed on regular basis.

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How do you handle schedule and cost variances in your work packages?

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1 What are schedule and cost variances?

2 How to calculate schedule and cost variances?

3 How to interpret schedule and cost variances?

4 How to handle schedule and cost variances?

5 How to avoid schedule and cost variances?

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