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Project Performance Measurement and Closure
Budgets and time are essential quantitative measures used to assess performance. Measuring performance against budget is not as easy as a qualitative measurement which can be quickly done by actual use or on-site inspection. It is more complex. To facilitate effective project performance measurement, variance and Cost Performance Index are recommended. Therefore, the earned value (EV) is crucial since it provides a realistic performance estimate against a time0phased budget. Hence, many companies and projects use variance analysis differently.
Variance analysis shows the variation between the planned and the actual outcome or behavior of a project by establishing the difference between the actual performance and the baseline. Its also essential in maintaining control over a project (Carr, 1993). Three values are involved when using these parameters, namely, the scheduled works planned cost (PV), the completed works actual cost (AC), and the completed works budget cost (EV). Thus, this paper will analyze how the variance metrics, namely, Cost Variance (CV) and Schedule Variance (SV), and the Cost Performance Index (CPI) metric operate in assessing project performance and closure.
Schedule Variance (SV)
Schedule Variance is a tool to measure the variation between the planned value (PV) and the earned value (EV). It is a general assessment of all the packages of the work or tasks in the project. This metric combines noncritical and critical activities in the values calculation. Also, it is expressed in monetary units, mainly in dollars. Therefore, this tool measures the degree to which the project is behind or ahead of schedule (Carr, 1993). Hence, it is calculated by the formula,
SV=EV-PV
This formula expresses the schedule variance based on cost. This indicates the cost of the work thats not complete in alignment with the initial schedule or the completed works cost. Hence, a positive SV value shows the project is going as planned or ahead of schedule. On the contrary, a negative SV shows that the project is lagging or behind schedule. It is a very effective tool for showing the projects direction, provided that at least 20% of the project is already complete.
Cost Variance
This is another metric used to assess the performance of a project. This metric is used to determine if the already accomplished...…behind the project schedule. The CV is also negative, showing that the work completed to date is over the projects initial budget. A positive indicator would be if the values were zero, meaning it would be on schedule and the budgeted cost, respectively, or a positive value to indicate the project is ahead of schedule and under the budgeted cost.
The CPI can be calculated based on the same data for this particular project. Thus,
CPI= EV/AC
CPI= 576,164/606900
CPI= 0.9493 or 0.95
Again, the 0.95 CPI index is less than a 1.00 CPI index. This shows that the $95 worth of the project work is complete or done for every $1.00 spent. This is still below the budget. If the value were 1, it would have indicated that the project is on cost or under the initial budget if it was greater than one.
Therefore, this projects SV, CV, and CPI values indicate some issues to investigate and act upon. The results present an unfavorable situation. Therefore, they act as warning signs showing that relevant action needs to be taken for this project, and remedies and appropriate adjustments are…
References
Carr, R. I. (1993). Cost, schedule, and time variances and integration. Journal of Construction Engineering and Management, 119(2), 245-265.
Christensen, D. S., & Heise, S. R. (1993). Cost performance index stability. National Contract Management Journal, 25(1), 7-15.
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