The Management of Variances

A Checklist for Field Personnel

What is a Variance? 

A variance is a change of what was planned.  For purpose of this checklist, the variance may or may not be the responsibility of another party.  It could be our own company’s responsibility.  However, when there is a variance, the responsibility of the field supervisor is to RECOGNIZE it in REAL TIME , to DOCUMENT and REPORT IT.

  • Tools for Recognizing there is a variance:  The tools available for recognizing there is a variance or a trend toward a variance are:
    • The contract (and subcontract)
    • The schedule and updates
      • Procurement schedules including submittals and approvals
    • Short Interim Plans
    • Project Budget
      • Labor cost codes
      • Earned Value
      • Material
      • General conditions
    • Progress Billing Schedule
    • RFI and Change Order Logs
    • Quality and Inspection Reports
    • Safety Reports
    • Progress Meeting Minutes
    • Coordination Meeting Minutes
  • Real time means as soon as the event occurs or the trend toward a variance is noted.  For example, you need not wait until you have overrun a labor cost code to recognize and report the variance.  As soon as there are indications from earned value or other performance reporting that the trend is toward an overrun, it should be recognized and reported.  Once an overrun has occurred, it cannot be mitigated.  A cost report after the work is completed is what I call a “tombstone” report: the patient is dead and nothing can be done to save him.  Labor and equipment cost reports must be dynamic so that the parties can show their leadership and creative abilities by jumping in early and at least trying to resolve the problems.   If the trend is noted early, there is still a chance that action can be taken to either prevent or mitigate the potential overrun.
  • Document obviously means to write it down. But where  should it be written down:  (These will be set forth in more detail; for now, just items to put on your radar screen that the following are documents which perhaps should reflect the variance at a point in time in the project)
    • Daily diaries
    • Planning meeting minutes  (If the variance is an issue which requires action of others than your own company)
    • Input to schedule up date and look ahead plans
    • Planning meeting minutes
    • Adjustments to cost reports
  • Report it obviously means to communicate the variance.  But communicate is a two way street.  When the field communicates to the home office project manager a variance, the project manager must read the report, discuss it with the field, together decide what needs to be done to handle the issue, then execute that plan and monitor.  The issue may involve action that will need to be taken by a general contractor or the owner, or it may be an internal or supplier issue.  Doesn’t make any difference.  If there is a variance or potential variance, it means the potential for a negative impact to the budget and the project team needs to be aware of it, and do what is necessary to protect the interest, the budget and the contract.  Because the issue is your own responsibility doesn’t mean it should be ducked.  Frankly, most of the contractors’ overruns are due to their own problems and not those of others.  So, identify in real time, communicate which means the team is on top of the issue and doing the best it can to keep the issue from causing an impact to the project.

What Are The Categories of Variances – By  Others

The following are general categories of variances which should be recognized:

  • Variances which may flow from the GENERAL CONTRACT such as:
    • SCOPE ISSUES:
      • Drawing errors
      • Changes to plans and specifications
      • Changed Conditions
      • Field directives to perform work in variance to P&S
      • Wrongful rejection of equipment or installation
      • Direction as to means and methods
      • Failure to  perform a contractual obligations, such as site access
      • So many changes it is difficult to plan/schedule (multiplicity of changes)
      • Direction to perform disputed work
      • Unit quantities
    • TIMELINESS ISSUES;
      • Response to RFI’s
      • Issuance of changes and directives
      • Inspections
      • Response to submittals
      • Providing access
      • Response to differing site condition
      • Review of schedule and schedule updates
    • INTERFERENCE WITH PROSECUTION OF WORK ISSUES
      • Change to work flow and sequence
      • Extend durations (work activities, project schedule)
      • Contract durations (work activities, project schedule)
      • Direction regarding means and methods
    • EXCUSABLE DELAYS UNDER THE CONTRACT, SUCH AS:
      • Unforeseeable Weather
      • Strikes
  • Variances Which Flow From the Subcontract (if you are a subcontractor):
    • Variances which flow through the subcontract from the general contract. Those are listed above. 
    • Variances to the SCOPE OF WORK  which flow through the subcontract agreement  (including the scope of work submitted by the subcontractor if incorporated into the agreement), including, for example:
      • Failure of general contractor to perform any of the duties set forth in the subcontractor scope of work.  Often these issues relate to:
        • Material storage
        • Material Handling
        • Lifting devices (buckhoists, cranes, lulls, etc)
        • Site access
      • Failure of the general contractor to perform schedule related functions such as:
        • Baseline schedule
        • Craft Coordination
        • Updating schedule
        • Failure to have precedent work done within required tolerances and timely
      • Failure of general contractor to conduct safety program effectively
      • Failure of general contractor to perform quality program effectively
      • Failure of general contractor to have adequate and competent supervisory personnel
      • BACKCHARGES
    • VARIANCES IN SCHEDULES AND SHORT INTERVAL PLANS
      • Durations – work activities
        • Longer
        • Shorter
      • Precedent work delays
      • Delays to critical path of project (project extension)
      • Work flow and work sequence
      • Suspensions or stop work
      • Timeliness of response to requests for direction
      • Inspection delays
    • INTERFERENCES  with Prosecution of Work
      • Access issues
      • Decision issues
      • Other craft issues
      • Failure to provide lifting devices as required by contract
      • Failure to provide or perform other functions as required by contract which interfere with ability to perform work
  • Variances which Flow from Purchase Agreements.  Supply chain management is one of the major contributors to delays and impacts on projects:
    • Variances from timely submittals
    • Variances from submittals not in accordance with contract
    • Failure to provide required supporting data, such as loads or other calculations
    • Equipment delivery delays
    • Wrong equipment delivered
    • Defective equipment
    • Failure to respond to job site issues on a proper or timely basis
    • Failure to provide required instructions and training
    • Failure to provide required documentation
    • Failure to respond to warranty calls

Categories of variances which Could Be the Responsibilty of the Contractor. There are numerous variances which may be the responsibility of the contractor, although many of the following could have been caused by others.  Nevertheless, these are variances and need to be recognized and reported . . .and something done to attempt to contain their impact on the project:

  • Estimate deficiencies
    • Quantities
    • Degree of difficulty
  • Performance of any contractual duty
  • Work Force
    • Adequacy – quantity
    • Adequacy – quality
    • Turnover
    • Absenteeism
    • Planning and discipline
      • Excessive breaks
      • Excessive time getting started and getting ready to leave
      • Lack of daily planning and goal setting
      • Lack of monitoring performance
    • Management of outsourced labor
    • Morale
      • Effect of intimidation approach by project manager(s), supervisors
  • Supervision
    • Competence
    • Ratio to crew
  • Workmanship
  • Deliveries
  • Adequacy of tools and equipment
  • Material Handling
    • Excessive pickup orders
  • Planning
  • Safety Practices
  • Coordination Drawings
  • Coordination of other trades
  • Completion of punchlists

The Following are Possible CONSEQUENCES or IMPACT to PRODUCTIVITY  or INCREASED COST due to the foregoing:

  • Movement
    • Stop and go (Mobilization and demobilization)
    • Suspension or stop work
    • Duration of movement
    • Effect on learning curve
    • Work flow or work sequence
  • Composition of Crew
    • Overmanning
    • Integrating one crew with another due to changes
    • Undermanning due to change of work schedule
    • Turnover due to change of work schedule
    • Absenteeism due to work schedule change
    • Supervisory/crew ratio
    • Morale factors
  • Hours worked by Crew
    • Overtime
      • Hours
      • Duration of overtime period (each additional week may increase impact of overtime on productivity)
    • Shift work
  • Environment of Work
    • Weather
      • Site problems
      • Temperature
      • Wind
      • Precipitation
    • Space (measure what was planned and now)
    • Crew congestion (what crew sizes planned and now)
    • Material handling issues
    • Structural interferences (equipment pads in the way, for example)
    • Building not closed in per schedule
    • Conditioned Air Not available per schedule
    • Controlled conditioned air not available per schedule
    • Safety issues (rain, wet floors, e.g.)
    • Lighting (candle power) available

Change Proposal Management, Time Related Claims, Differing Site Conditions  and Pricing are discussed in other articles which discuss:

  • Contractual Issues
  • Delay Damages
  • Accelerations
  • Suspensions
  • Change of Work Flow and Interference with Prosecution of Work
  • Cardinal Changes
    • Multiplicity of Changes
  • Terminations for Convenience
  • Terminations for Default
  • Backcharges
  • Breach of Contract