An estimate variance shows how far actual quantities or costs differ from the plan. To identify the cause, compare the same work over the same period, in the same units and on the same cost basis. Check dates against the project schedule. Record any change to the contract price separately in accordance with the contract terms.
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How to calculate and record a variance
Subtract the planned figure from the actual figure. A positive cost variance means you spent more than planned. A negative one means you spent less.
In this worked example, the company budgeted RUB 1,200,000 in internal costs for an office renovation. Actual internal costs for the same scope came to RUB 1,500,000, giving a variance of +RUB 300,000. These figures show the company’s cost overrun. Check the price agreed with the client against the contract and any agreed changes.
Record the date, the original estimate version, the line item, its unit of measurement, the planned and actual figures, and the difference. For each changed item, record the reason and its basis, such as a new measurement, a supplier quote or an updated brief. Record separately which changes to scope, price and timing were agreed, who agreed to them, when they did so and which document records the agreement.
Why estimates differ from actual results
- Quantities were revised. Compare the original calculation with the new measurements and record the difference against the relevant line items.
- Prices changed. Compare the rates in the estimate with supplier quotes as of the purchase date.
- The brief changed. Record which work or materials were added, replaced or removed, then calculate the impact on the total and the schedule.
- Previously hidden work was discovered. Record what you found after opening up the area and estimate the work required separately.
- A calculation error was found. Check units, multipliers and duplicate entries, then recalculate the total using the corrected items.
Before agreeing on the estimate, check the quantities, whether prices are current and which work cannot be estimated without an inspection. For that work, state what you know now and when you expect to have the information needed to refine the estimate.
What to do when there is a variance
Give the client a list of the changed items, the reason for the changes and the revised amount. Show which dates will change. Check how the contract defines the price and sets out the process for agreeing changes. If you use separate estimates for each stage, check separately whether the agreed total changes. If you calculate charges based on actual quantities, check which version of the price list applies, the units used and how those quantities are accepted.
Rules for contracts in Russia
Under Article 709 of the Russian Civil Code (in Russian), an estimate prepared by the contractor becomes part of the contract for work once the client confirms it, if the work is carried out on the basis of that estimate. If additional work requires a substantial increase over the approximate price, the contractor must notify the client in good time. The same article specifies the grounds for changing a fixed price.
Article 743 of the Russian Civil Code (in Russian) applies to construction contracts. The contractor must notify the client of work that the technical documentation does not account for and that would increase the estimated cost. If the client does not respond within ten days, the contractor must generally suspend the affected work. The law or contract may specify a different period.
For a consumer contract for work or services, Article 33 of the Russian Federation’s Law on Consumer Protection (in Russian) regulates fixed and approximate estimates separately. An estimate must be prepared if either the consumer or the provider requests one. If the need for additional work would cause a substantial overrun of the approximate estimate, the provider must notify the consumer in good time.
How to compare planned and actual figures in 101
- In the estimate for the stage (in Russian), enter the planned scope of work, quantities and costs. If you add line items from a file using AI (in Russian), compare the imported names, units and quantities with the source before saving. Check each client price or internal cost field you can see.
- In the report on completed work (in Russian), enter the actual quantities for the items in the estimate. Check each visible client price or internal cost field. Record payments as a separate transaction.
- In the web version, open the project, go to the Gantt tab and open the additional Plan vs Actual chart (in Russian). The cost view compares the client prices from the project’s estimates and reports by date. The profit view shows profit with the markup taken into account. Check internal cost using the document fields you can see and check the schedule against the event dates.
