What is Variance Analysis?

Variance Analysis in the construction industry refers to the process of investigating the difference between actual and planned costs, schedules, or resources during the life cycle of a construction project. It focuses on identifying and understanding discrepancies between what was initially proposed and the actual outcome, allowing project managers to spot inefficiencies, control costs and adjust project goals accordingly.For instance, if a construction project was expected to consume $200,000 in materials but actually consumed $250,000, a variance analysis would examine why this $50,000 overspend occurred - whether due to price inflation, inaccurate estimating, or uncontrolled scope changes.It is a crucial tool for proactive project management, allowing early detection of performance issues and enabling timely corrective actions. Understanding the causes of variances also informs future project planning, improving accuracy of estimates and success rates of subsequent projects.