Page 104 - The Six Sigma Project Planner

Analysis of Budget Reports
The project manager and Black Belt should review the variance data for patterns that
contain useful information. Ideally, the pattern will be a mixture of positive and
negative but economically and statistically insignificant variances. Assuming that this
pattern is accompanied by an on-schedule project, this indicates a reasonably good
budget, i.e., an accurate forecasting of expenditures. Variances should be evaluated
separately for each type of budget (direct labor, materials, etc.). However, the variance
report for the entire project is the primary source of information concerning the status
of the project in terms of resource use. Reports are received and analyzed periodically.
For most quality improvement projects, monthly or weekly reports are adequate.
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Budget variance analysis should include the following:
• Trends: Occasional departures from budget are to be expected. Of greater concern
is a pattern that indicates a fundamental problem with the budget. Trends are
easier to detect from graphic reports.
• Overspending: Since budgeted resources are generally scarce, overspending
represents a serious threat to the project and, perhaps, to the organization itself.
When a project overspends its budget, it depletes the resources available for
other activities and projects. The project team, team leader, and sponsors should
design monitoring systems to detect and correct overspending quickly.
Overspending is often a symptom of other problems with the project, e.g., paying
extra in an attempt to catch up after falling behind schedule, additional expenses
for rework, etc.
• Underspending is potentially as serious a problem as overspending. If the project
budget was prepared properly, then the expenses reflect a given schedule and
quality level. Underspending may reflect “cutting corners” or allowing suppliers
an allowance for slower delivery. The reasons for any significant departure from
the plan should be explained. If the underspending is justified, the project
manager should report the situation to the project sponsor at once so that
resources can be redirected to other enterprise priorities.

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Schedule Control Plan
The primary means of controlling the project’s schedule are periodic progress reviews
and timely response to deviations from schedule. Of course, the foundation of this
activity is an accurate schedule and ongoing commitment to the project on the part of
those involved. Should a pattern of schedule slippages appear and remain uncorrected,
the project manager must call it to the attention of the project sponsor quickly enough to
save the project delivery date.

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This is not to be confused with the statistical technique, Analysis of Variance (ANOVA).
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Part of the official project plan.

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