When to use it
Use thresholds to focus discussion on changes requiring a decision.
When to be cautious
A percentage threshold can hide material absolute changes or encourage gaming near the boundary.
Apply it
Relative deviation = (observed − baseline) / baseline × 100%
Requires a nonzero baseline. A positive value may be favourable for benefits and unfavourable for cost; label the direction.
- Agree both relative and absolute tolerances and their owners.
- Track direction and persistence as well as the latest variance.
- Investigate causes and forecast effects before changing a baseline.
An example in practice
A small cost percentage hides a large cash requirement. Review the absolute funding impact as well as the percentage.
Source & credit
Standard estimating practice; the cited guide documents use rather than claiming invention.
GAO: Cost Estimating and Assessment Guide
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