Project Baseline Variance

Posted by SkillMaker in Jan, 2017

What is Project Baseline Variance?

A project baseline is a collection of base data or values for a project. Typically, this will include the planned budget, the original start and finish dates for a project and the expected effort (e.g. number of hours). For analysis of baseline variances to be meaningful, baseline values need to be as accurate as possible, as they are the measure against which performance is measured.

So that baseline variance can be calculated, the baseline values must be saved in the project schedule. If a project’s parameters subsequently change significantly, it is best to remove the old baseline data and reset it for the new project scenario.

Interpreting baseline variances

Baseline variances are basically the differences between what was expected to happen on a project (as planned and documented in the Project Plan) — be it costs incurred or time taken — and what did actually happen. The differences may not be particularly reliable indicators of success or failure at the start of a project, when most project tasks are still to ‘get going’. However, as the project advances, these differences, and consequent performance predictions, are likely to become more accurate.

A project baseline provides manager with the means to assess project performance and to work out values for the Earned Value Management calculations (EVM). (See the ‘Project Schedule’ topic for more information on EVM.) Earned value shows how much of the budget and time should have been spent with regard to the amount of work done so far based on a metric performance indicator.

The assessed baseline variance can be positive or negative.

Positive values are of more concern for Project Managers they indicate that the cost is over the baseline budget, or the number of hours taken on a task is longer than the baseline estimate. They indicate that managerial intervention is needed if the project is to stay on track.
Conversely, negative values indicate that better progress is being made than was planned in the baseline data. Also, if the value of the SPI (Schedule Performance Index) — which is calculated by dividing the Earned Value by the Planned Value—is more than 1.0, the project is ahead of schedule (see graph below).
If the baseline variance is zero (0) it may mean that the task is on track with what was planned. But, if values are consistently zero for all calculations, it may mean that there is no baseline.