EVMS Guideline 23 Design Considerations - Variance Reporting

ANSI Standard 748 Guideline 23 requires the organization to at least monthly analyze and report reasons for significant cost variances (CV) and schedule variances (SV). This requirement aids management decision making and corrective actions. Significant variances are objectively determined through the use of management and contractual thresholds. Management thresholds are typically more restrictive than contractual thresholds. Management thresholds are used for internal management purposes and can act as an early warning about a work element that is trending toward exceeding a contractual threshold. Contractual thresholds are just what the name infers. They the contractually agreed upon point beyond which a customer must be informed about a problem control account.

In an Earned Value Management System (EVMS), a threshold may be for a positive or negative SV or CV. It is a predetermined dollar amount and/or percentage beyond which variance reporting is required. For example, a CV threshold might be +/- $15,000 or 10%, whichever is greater. In this example, let us say that at a particular reporting period, an $81,000 work package has a -$14,000 CV. CV is determined by subtracting ACWP from BCWP (see EVMS Guideline 22 Design Considerations - Determination of Schedule & Cost Variances). This negative CV does not meet the dollar criterion for a significant variance since the dollar threshold is +/- $15,000. However, this negative CV does exceed the percentage criterion of 10%. This percentage is -17%. Therefore, this work element is a significant variance and requires reporting.

In developing its Guideline 23 system description document, the organization should author procedures ensuring:

1. The organization sets internal managerial significant cost and schedule variance thresholds


2. The organization sets contractual significant cost and schedule variance thresholds


3. The organization measures performance of the lowest level organization responsible for the control account


4. The organization determines variance at completion at the control account level and at other managerial levels


5. The organization calculates budgeted cost of work performed (BCWP) in a manner with the way work is planned. (For example, if work is planned on a measured basis, is budgeted cost for work performed calculated on a measured basis using the same rates and values)


6. The organization performs variance analysis for identifying (at the control account and other appropriate levels) cost and schedule variances which:
   
   • Identify and isolate causes of favorable and unfavorable cost and schedule variances
   
   
   • Evaluate the impact of schedule changes, workaround, etc.
   
   
   • Evaluate the performance of operating organizations
   
   
   • Identify potential or actual overruns and underruns
   
   


7. The organization uses quantitative earned value status information for performance of period analysis and standardized narrative reporting


8. The organization logs and tracks corrective actions for significant variances


9. The organization integrates schedules with earned value data for status analysis


10. The organization determines current schedule status and forecasts schedule completion


11. The organization time phases material budgets in a manner ensuring that actual costs and related determination of earned values occur within the same reporting period


12. The organization determines current and projected material usage in such a manner that cost and schedule variances can be recognized and acted upon


13. The organization determines material price variances


14. The organization measures the performance of critical subcontractors