Variance Analysis Report (VAR) in EVM Explained

<div class="ge-article-wrapper"><nav class="ge-toc" aria-label="Table of contents"><p class="ge-toc-label">In this article</p><ul class="ge-toc-list"><li><a href="#what-a-var-contains">What a VAR Contains</a></li><li><a href="#when-a-var-is-required">When a VAR Is Required</a></li><li><a href="#worked-example-a-var-in-action">Worked Example: A VAR in Action</a></li><li><a href="#why-vars-matter-in-construction">Why VARs Matter in Construction</a></li><li><a href="#common-mistakes">Common Mistakes</a></li><li><a href="#frequently-asked-questions">Frequently Asked Questions</a></li></ul></nav><article class="ge-article-body"><p>A Variance Analysis Report (VAR) is a structured document that explains why a control account has breached its <a href="/en/earned-value/definitions/variance-threshold">variance threshold</a>, what's causing it, and what the <a href="/en/earned-value/definitions/control-account-manager">Control Account Manager</a> intends to do about it. It's not a status update. It's not a narrative about how things are "generally on track." It's a formal, auditable explanation that answers one question: why are your numbers off, and what's the plan?</p><p>VARs are part of the <a href="/en/earned-value/definitions">earned value definitions glossary</a>. For the reporting framework they feed into, see the <a href="/en/earned-value/report-template">earned value report template</a>.</p><h2 id="what-a-var-contains">What a VAR Contains</h2><p>Under <a href="/en/earned-value/definitions/eia-748-standard">EIA-748</a> criteria 22-25, projects must identify variances at control account level, explain significant deviations, and document corrective actions. The VAR is how you do that.</p><p>Every VAR follows the same structure. No waffle, no padding, no burying bad news in paragraph seven.</p><pre class="ge-ascii-diagram ge-anim">VARIANCE ANALYSIS REPORT STRUCTURE ===================================== +--------------------------------------------------+ | 1. IDENTIFICATION | | - Control Account: CA-005 (Structural Frame) | | - CAM: J. Thornton | | - Reporting Period: March 2026 | | - Threshold Breached: CV &gt; -5% (actual: -8.2%)| +--------------------------------------------------+ | v +--------------------------------------------------+ | 2. PROBLEM STATEMENT | | What happened? State the variance clearly. | | "CV = -£164,000 (-8.2% against BAC of £2M)" | +--------------------------------------------------+ | v +--------------------------------------------------+ | 3. ROOT CAUSE ANALYSIS | | Why did it happen? Be specific. | | - Steel delivery delay (supplier insolvency) | | - Overtime to recover programme (+£48K) | | - Temporary works redesign (+£62K) | +--------------------------------------------------+ | v +--------------------------------------------------+ | 4. IMPACT ASSESSMENT | | What does it mean for the project? | | - Cost: EAC increased by £164K | | - Schedule: 2-week delay to frame complete | | - Risk: knock-on to cladding start | +--------------------------------------------------+ | v +--------------------------------------------------+ | 5. CORRECTIVE ACTION | | What are you doing about it? | | - Action 1: Alternative steel supplier (done) | | - Action 2: Weekend shifts for 4 weeks | | - Action 3: Re-sequence cladding north face | | - Expected recovery: £80K cost, 1 week sched | +--------------------------------------------------+ | v +--------------------------------------------------+ | 6. FORECAST IMPACT | | Updated EAC and completion date | | - EAC revised: £2,164,000 (was £2,000,000) | | - Completion: 14 July 2026 (was 30 June) | +--------------------------------------------------+</pre><h2 id="when-a-var-is-required">When a VAR Is Required</h2><p>A VAR isn't written for every minor fluctuation. It's triggered when a control account crosses a predefined <a href="/en/earned-value/definitions/variance-threshold">variance threshold</a>. Thresholds vary by project and client, but a typical UK construction setup looks like this:</p><div class="ge-table-wrap ge-anim"><table class="ge-table"><thead><tr><th>Variance Type</th><th>Minor (monitor)</th><th>Significant (VAR required)</th><th>Critical (escalate)</th></tr></thead><tbody><tr><td>Cost Variance (CV%)</td><td>> -3%</td><td>> -5%</td><td>> -10%</td></tr><tr><td>Cost Variance (CV£)</td><td>> -£50K</td><td>> -£100K</td><td>> -£250K</td></tr><tr><td>Schedule Variance (SV%)</td><td>> -3%</td><td>> -5%</td><td>> -10%</td></tr><tr><td><a href="/en/earned-value/definitions/cost-performance-index">CPI</a></td><td>< 0.97</td><td>< 0.95</td><td>< 0.90</td></tr><tr><td><a href="/en/earned-value/definitions/schedule-performance-index">SPI</a></td><td>< 0.97</td><td>< 0.95</td><td>< 0.90</td></tr></tbody></table></div><p>The "significant" column is your VAR trigger. The CAM writes the report within the current reporting period.</p><h2 id="worked-example-a-var-in-action">Worked Example: A VAR in Action</h2><span class="ge-worked-label">Worked Example</span><div class="ge-callout ge-anim"><p><strong>Scenario:</strong> A £35M NEC4 Option C hospital refurbishment in Bristol. The structural frame package (CA-005) has a <a href="/en/earned-value/definitions/budget-at-completion">BAC</a> of £2,000,000 and is managed by CAM Julia Thornton.</p><p><strong>March 2026 reporting period data:</strong></p><div class="ge-table-wrap ge-anim"><table class="ge-table"><thead><tr><th>Metric</th><th>Value</th></tr></thead><tbody><tr><td>BAC</td><td>£2,000,000</td></tr><tr><td>PV (cumulative)</td><td>£1,200,000</td></tr><tr><td>EV (cumulative)</td><td>£1,080,000</td></tr><tr><td>AC (cumulative)</td><td>£1,244,000</td></tr><tr><td>CV</td><td>-£164,000 (-8.2%)</td></tr><tr><td>SV</td><td>-£120,000 (-6.0%)</td></tr><tr><td>CPI</td><td>0.868</td></tr><tr><td>SPI</td><td>0.900</td></tr></tbody></table></div><p>Both CV and SV breach the -5% threshold. Julia writes the VAR.</p><p><strong>Root Cause:</strong> The primary steel supplier (Midlands Steel Ltd) entered administration on 22 February 2026. This caused a 3-week delay to second-floor beam delivery. To mitigate programme impact, the team worked weekend overtime for 3 weekends (+£48,000 in labour). Additionally, the delay forced a redesign of temporary works to allow cladding preparation on the ground floor while the frame was incomplete (+£62,000). A further £54,000 in prelim costs accrued due to the extended programme.</p><p><strong>Corrective Actions:</strong></p><ul><li>Alternative supplier (Barrett Steel) appointed 8 March, deliveries resumed 15 March</li><li>Weekend working authorised for 4 further weekends (forecast cost: £64,000)</li><li>Cladding start re-sequenced to north elevation (no impact on overall completion)</li></ul><p><strong>Updated Forecast:</strong></p><ul><li><a href="/en/earned-value/definitions/estimate-at-completion">EAC</a> for CA-005: £2,210,000 (BAC + £210K unrecoverable overrun)</li><li><a href="/en/earned-value/definitions/variance-at-completion">VAC</a> = £2,000,000 - £2,210,000 = -£210,000</li><li>Completion: 14 July 2026 (was 30 June, 2 weeks late)</li></ul><p>The VAR is submitted to the project controls lead on 4 April 2026 and reviewed at the monthly EVM governance meeting.</p></div><h2 id="why-vars-matter-in-construction">Why VARs Matter in Construction</h2><p>I've worked on projects with EVM systems that produced beautiful dashboards but no VARs. Useless. The dashboard tells you something's wrong. The VAR tells you why and what's being done.</p><p>Without VARs, earned value is just numbers. With VARs, it's a management tool. The discipline of writing a formal root cause analysis forces CAMs to actually think about what's going wrong rather than hoping next month will be better. (It won't.)</p><p>On one railway programme I was involved with, introducing mandatory VARs for any CA with CPI below 0.95 cut the average recovery time from 4 months to 6 weeks. Not because the VARs were magic, because the act of writing them forced people to identify problems early and commit to specific actions with dates.</p><h2 id="common-mistakes">Common Mistakes</h2><ol><li><strong>Writing VARs that describe symptoms, not causes.</strong> "CV is negative due to higher than expected costs" is not a root cause. That's just restating the variance. The root cause is "steel supplier entered administration" or "ground conditions worse than site investigation predicted." Dig deeper.</li><li><strong>Corrective actions without owners or dates.</strong> "We will look into alternative suppliers" is not an action. "Barrett Steel appointed by J. Thornton, first delivery 15 March 2026" is an action. Every corrective action needs a name, a date, and a measurable outcome.</li><li><strong>Only writing VARs for cost.</strong> Schedule variances matter too. A control account with SV of -10% might have a fine CPI, but if it's on the critical path, the whole project is slipping. Write VARs for both cost and schedule breaches.</li><li><strong>Treating VARs as punishment.</strong> If CAMs see VARs as blame documents, they'll game the numbers to avoid triggering one. VARs should be analytical, not accusatory. The best project cultures I've seen treat VARs as problem-solving tools, not performance reviews.</li></ol><div class="ge-product-note ge-anim"><p><strong>How Gather helps.</strong> Gather's AI reads your site diaries daily and maps progress against your cost-loaded programme, giving you accurate earned value data without manual spreadsheet updates. <a href="https://gatherinsights.com/contact">Book a demo</a> to see it working on a live NEC4 project.</p></div><h2 id="frequently-asked-questions">Frequently Asked Questions</h2><h3>How often should VARs be produced?</h3><p>Monthly, aligned with the EVM reporting cycle. If a control account is in breach at the cut-off date, the VAR should be submitted within 5 working days of period close. Some projects require VARs to be updated monthly until the control account recovers below threshold. Don't let stale VARs linger, if the corrective actions aren't working, the VAR should say so.</p><h3>Who writes the VAR?</h3><p>The <a href="/en/earned-value/definitions/control-account-manager">Control Account Manager</a>. They own the numbers, they understand the work, and they're accountable for the corrective actions. The project controls team may help with data preparation, but the narrative and actions must come from the person managing the work. A VAR written by someone who hasn't been on site is obvious and useless.</p><h3>Is a VAR the same as a monthly progress report?</h3><p>No. A monthly progress report covers the whole project and summarises performance. A VAR is specific to one control account that's breached a threshold. Think of it this way: the progress report is the health check; the VAR is the specialist referral. They serve different purposes and different audiences.</p><h3>Are VARs required under NEC4?</h3><p>NEC4 doesn't specifically require VARs by name. But if you're running EVM on an NEC4 contract, particularly Option C where the pain/gain mechanism makes cost performance critical, VARs are the mechanism that connects your EVM data to the commercial management of <a href="/en/earned-value/definitions/compensation-event">compensation events</a> and forecast costs. Any serious EVM implementation will include them regardless of contract form.</p></article></div>