If you’re a Control Account Manager (CAM), you’re least favorite time of the monthly reporting cycle is when your analysts send you EV reports and variances and ask you to write an analysis for each variance that trips the threshold. This may be one of the most frustrating and time consuming aspects of earned value for CAMs – it’s also arguably the most important part. Variance analyses are integral part of communicating not only issues on a program, but successes as well.
Types of Variance
Before we get into what makes a good Variance Analysis, let’s briefly touch on what types of variances you may be asked to write to:
- Current Period Schedule Variance (SV) and Cost Variance (CV)
- Cumulative SV and CV
- At complete
- TCPI analysis
And what information is required in a Variance Analysis?
- Root Cause – Define what the issue is and how it was caused
- Impact – Define what the internal (specifically related to this control account) cost/schedule/technical impacts as well as the external (Program wide and dependent accounts) impacts
- Corrective action – Detail the mitigation plan that has been defined to correct/prevent/minimize further impact to the program
At a minimum a complete Variance Analyses will have a Cause/Impact/Corrective action that addresses all the variances where a threshold is tripped.
When writing a Variance Analysis it’s important to remember who the report is being written for, typically internal program management and more importantly senior level personnel on the customer side. It should be written in a manner that provides all the necessary details but does not get bogged down into too much technical jargon. These reports need to be presentable and actionable for upper management.
There are multiple parts to writing a good “Root Cause” in the variance:
- The “What” – What happened? Describe in detail what technical events led to a variance being recorded.
- Provide separate analysis for cost and schedule variances
- For cost identify if the variance is usage (More hours required than performed) or rate (i.e. more or less expensive resources or rate changes)
- Emphasize the significant issues
- The “Why” – Why did it happen? What triggered the risk or event that drove the variance from happening?
Avoid the following statements in your root cause:
- “Spent more hours than planned”
- “More efficient than originally planned”
- “Schedule variance is due to XYZ being late”
As stated above, two key aspects need to be addressed when writing an Impact statement:
- Quantify the Control Account:
- Schedule Impact – How does the variance impact the schedule for the account? How many days early or late is the account?
- Cost Impact – What is the long term cost impact of the variance?
- Technical – What, if any, positive or negative impact on the technical aspects are there?
- Quantify the Macro impacts:
- Schedule – What if any impact does it have on the program schedule? What this a critical path item? Does it push the POP date? What if any impact does it have on other dependent CA’s?
- Cost – What is the overall impact to the program cost?
- Technical – What, if any, impact to the technical aspects of the program are there?
Corrective Action Plan
Lastly, a corrective action plan to minimize or recover the impacts is required. The corrective action plan should:
- Describe the specific actions being taken to mitigate the continued risk
- Incorporate mitigation plan into the schedule
- Provide updates on mitigation plans
- Mitigation plans are reviewed and approved by the Program Manager
Writing Variance Analyses can be a time consuming and at sometimes frustrating responsibility. However, it’s important to remember that a good variance analysis reduces the programs and customers risks. It does this by formally identifying issues early, formulating mitigation plans and requiring the contract to track and status the mitigation plan to completion.