Amacom - Modern Project Management (Ocr) - 2001 ! - (By Laxxuss)

Variances other than change orders are designated

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: prove project management results. While this is a significant segment of the project management profession, it is by no means all of the project management profession. A change order is a variance (documentation) that results from a client's agreeing to a change in the scope of the work. Change orders usually result in a change in the contractual agreement or addendum to it in some form. Consequently, the original contract plus all change orders represents the current contractual environment in which the work is being performed. For this reason, the original budget modified by all the new quantity and labor -hour estimates in all of the change orders Page 90 has come to be known as the client budget , as is explained a little later in this chapter. Variances other than change orders are designated quantification variances or productivity variances, depending upon whether they arose as a result of a quantification or productivity deviation. In practice, it is impractical to keep track of every observed quantification or productivity deviation, but significant deviations need to be documented by a variance. One relies on the socalled Law of Compensating Error to cancel out the effects of the smaller deviations. Each variance must be assigned a variance number (identifier), and, in addition, change orders need to be assigned a change order number. No variance can be of more than one type (e.g., both a quantification and productivity variance). Observed deviations with both quantification and productivity components must be considered as separate deviations and documented by separate variances. A variance can affect more than one task or cost element within a work package; it can also affect more than one work package. When this is the case, there needs to be a separate line item in the variance for each task and each cost element affected. Sometimes, new work packages need to be created for change orders or for quantification deviations. These work packages can have a zero original quantity or labor-hour bud-get (since they did not exist when the project originally started). They then obtain their budget only from the variances against them. The client budget (sometimes called the contract budget) for a work package is the original budget together with all change orders that affect the package (change order line items that affect it). The client budget for the project is the sum of the client budgets for all the work packages that constitute the project. The control budget (sometimes called the working budget ) for a work package is the client budget together with all quantification variances affecting the work package. The control budget for the project is the sum of the control budgets for all work Page 91 packages in the project. The control budget, is the budget that reflects the true scope of the work, since it has been adjusted to correct all significant quantification errors, and as such it is the budget that is used in performance measurement, as explained...
View Full Document

Ask a homework question - tutors are online