According to the PMBOK Guide, specifically within the Control Costs process, Variance Analysis is the primary technique used to compare actual project performance to the planned or expected performance (the cost baseline).
* Mechanism: Variance analysis reviews the differences (variances) between planned and actual performance. In cost management, this specifically involves looking at:
* Cost Variance (CV): The numerical difference between the Earned Value (EV) and the Actual Cost (AC). The formula is $CV = EV - AC$.
* Schedule Variance (SV): While a schedule metric, it is often analyzed alongside cost in Earned Value Management (EVM) to see if the project is spending more or less than planned for the work performed.
* Purpose: It helps the project manager determine the magnitude and cause of variance relative to the cost baseline. By identifying whether the project is over or under budget, the project manager can decide if corrective or preventive actions are required.
* Relationship to EVM: Variance analysis is a core component of Earned Value Management, which integrates scope, schedule, and resource measurements to assess project performance and progress.
Comparison with other options:
* A. Cost aggregation: This is a technique used in the Determine Budget process. It involves summing the lower-level work package cost estimates into higher-level component levels (such as control accounts) to establish the cost baseline. It is not a performance comparison tool.
* B. Trend analysis: This technique examines project performance over time to determine if performance is improving or deteriorating. While it uses performance data, its primary goal is to predict future patterns, whereas comparing actuals to the plan at a specific point in time is the definition of variance analysis.
* C. Forecasting: This is the process of predicting future project performance based on current information and trends (e.g., Estimate at Completion - EAC). It is an outcome of performance analysis, not the technique used to compare current actuals to the plan.