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Project Tracking (Schedule & Cost Performance)

5 replies [Last post]
Thu, 2007-05-03 06:30
Hernando Pesca
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Fellows,

What is usually the acceptable cost performance index (CPI) and SPI? Currently, our project (a manufacturing plant) in Bahrain has a CPI of 1.28 (the highest we have) and SPI of 1.02.

If the CPI goes higher, the schedule is very conservative and the baseline is a "poor baseline". In your experience, what is the highest CPI you have? What corrective measures are you taking? Are you revising the schedule?

Thanks...

Hernan
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Replies

Sun, 2007-05-13 13:41
#1
Stephen Devaux
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Bijaya Bajracharya wrote: "What you have writeen is the exact defination of CPI and SPI. Definitely SPI of 0.9 in bad compared to SPI of 1."

Not necessarily the case -- remember, the project is as long as the longest (critical) path. Traditionally, EV treats the critical path activities no differently from the way it treats other activities. It is possible for a project to have a 1.00, or even 1.10, SPI, but still be way behind schedule if the CP milestones have been delayed, but this has been offset by "early" completion of milestones that have lots of float. In fact, this is an old method of committing project fraud.

To address the specific example above, I’d rather have a project with an SPI of .90 on the CP, and nothing else having slipped beyond its float, than a project that has a 1.00 SPI comprised of an SPI of .85 on the CP milestones, but offset by lots of non-CP milestones accomplished ahead of their early (forward pass) dates.
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Fri, 2007-05-11 10:39
#2
Bijaya Bajracharya
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What you have writeen is the exact defination of CPI and SPI. Definitely SPI of 0.9 in bad compared to SPI of 1. Similarly CPI of 0.9, as you rightly wrote, means that you are earning 90 cents for every dollar you have spent.

Now in reality, it is very likely that in earlier stage of the project, you will be getting CPI of more than 1. Theoretically it will mean you are earning (producing) more than you have actually spent. However what I asked you to check is the figures that are going in as the actual costs (you may need to get these figures from QS or Cost Engineers or Accounts). And my experience is that there is always some lag in reporting the actual cost. Let’s take an example:

An activity starts in March and gets completed 20%.
By the end of April, it is 50% completed.

Cummulative Actual cost for March = x
Cummulative Actual cost for April = y

When you update the programme at the end of March, of course, you will progress it upto 20%. You may find that value of x reported when you are updating could be still zero. OR you will get a value which actually does not represent the cost of full 20% worth of work.

The result is that CPI will be more than 1. And you may not be actually making any profit at all.

The same thing will repeat in April. Value y reported may not be full value of the 50% of work.

The gap will eventually close one payment period after the completion of the activity. ( you will find cost coming after work is completed).

So what I want to say is that check the actual cost accrual pattern before intepreting the CPI figures.
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Fri, 2007-05-11 05:03
#3
Hernando Pesca
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Bijaya,

Thanks for the reply. The range you have most likely happens. But would you agree with me that a SPI or CPI of 0.9 is not a good indication? An SPI of 0.90 is just like- for every dollar of work we planned do, we did complete 90 cents; and a CPI of 0.90 is like- for every dollar we spent, we only accomplished 90 cents.

Regards,

Hernan
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Fri, 2007-05-11 05:02
#4
Hernando Pesca
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Bijaya,

Thanks for the reply. The range you have most likely happens. But would you agree with me that a SPI or CPI of 0.9 is not a good indication? An SPI of 0.90 is just like- for every dollar of work we planned do, we did complete 90 cents; and a CPI of 0.90 is like- for every dollar we spent, we only accomplished 90 cents.

Regards,

Hernan
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Thu, 2007-05-03 09:37
#5
Bijaya Bajracharya
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Normally it should be between 0.9 and 1.1. In one of the project I had worked in past, we had to give special explaination if the CPI or SPI were outside the range of 0.95 to 1.05.

A lot of times, a higher value of CPI is due to lag between actual work performance and progress claiming (by contractor) and subsequent payment. It depends, check what figures are really going as your acutal cost.

In the earlier stage of the project, CPI is likely to be higher but it will start dropping down about half way through (generally). SPI is a good measure of schedule performance in earlier stage. As the project gets closer to completion, this index is not sensitive as SPI will be 1 at completion.
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