Project performance analysis is a critical aspect of project management, enabling better decision-making and early identification of potential issues. It allows stakeholders to assess the efficiency and effectiveness of project execution. By monitoring these metrics, project managers can identify variances in cost or schedule, make necessary adjustments, and keep the project on track. The metrics are categorized into two main areas: cost performance and schedule performance.
This document consists of three sections:
The cost performance metrics help determine if the project is within its financial constraints.
The Actual Cost of Work Performed, also known as Used Cost. Used cost refers to the cost incurred for the work that has been completed. This cost is reported from the transactions created by the connected objects until the corresponding voucher is created. The voucher will then be used as the basis for the used cost.
The Budget at Completion. If the project's Earned Value Method is:
The Budgeted Cost of Work Performed (BCWP), also known as Earned Value, represents the budgeted cost for the work that has been completed based on the progress made. Accurate progress reporting is crucial to ensure valid earned value figures. The BCWP value is calculated as the Budget at Completion (BAC) multiplied by the progress percentage (BCWP = BAC * Progress).
Performance analysis often involves comparing the Earned Value (BCWP) to the Budgeted Cost of Work Scheduled (BCWS) and the Actual Cost of Work Performed (ACWP). This comparison helps project managers assess project performance, including variances in cost, schedule, and overall progress.
The Cost Performance Index (CPI) indicates whether the budgeted cost for the work performed is more or less than the actual cost for the work performed. It is calculated as the Earned Value divided by the Actual Cost of Work Performed (CPI = BCWP / ACWP).
Better information on the project’s performance can be obtained by studying the CPI instead of only the Cost Variance (CV). The CPI provides a more accurate and comprehensive view of the project’s cost efficiency. Consider the following example:
| Activity | BCWP | ACWP | CV | CPI |
| Activity 1 | 200,000 | 220,000 | -20,000 | 0.9 |
| Activity 2 | 50,000 | 70,000 | -20,000 | 0.7 |
Both activities have the same CV, but the CPI clearly shows that Activity 2 has a far greater problem than Activity 1. This is because the CPI measures cost efficiency by comparing the budgeted cost of work performed (BCWP) to the actual cost of work performed (ACWP). In this example, Activity 2 has a CPI of 0.7, meaning it is significantly over budget, while Activity 1 has a CPI of 0.9, indicating a smaller over-budget issue. This discrepancy could not be detected by only looking at the Cost Variance.
By analyzing the CPI in conjunction with other project performance metrics, valuable insights can be gained into the project’s cost efficiency, potential issues can be identified, and corrective actions can be implemented.
Cost Variance (CV) indicates whether costs to date are better or worse than budgeted for the work performed. It is calculated as the Earned Value minus the Actual Cost of Work Performed (CV = BCWP − ACWP).
The Estimate at Completion is the summation of Actual Cost of Work Performed and the Estimate to Complete, (ACWP + ETC).
The Independent Estimate at Completion (IEAC) provides an estimate of the total cost at completion, assuming the work continues at the current rate. It is calculated as the Actual Cost of Work Performed plus the Independent Estimate to Complete (IEAC = ACWP + IETC).
The Independent Estimate to Complete (IETC) is an estimate of the cost at completion, based on the work continuing at the current rate. The IETC is calculated as the Budget at Completion minus the Earned Value, divided by the Cost Performance Index (BAC − BCWP) / CPI.
The “independent” part means that this estimate is calculated without considering the original budget but based on the current rate of spending.
The Estimate to Complete is the total estimated remaining cost to complete the activity.
The Independent Variance at Completion (IVAC) estimates how the budget will be affected if there is no change to the current rate of Earned Value and the current rate of used costs. The IVAC is calculated as the Budget at Completion minus the Independent Estimate at Completion (BAC − IEAC).
The Variance at Completion, calculated as the Budget at Completion minus the Estimate at Completion, (BAC − EAC).
The Budgeted Cost of Work Scheduled, also known as scheduled work. Scheduled work is the budgeted cost scheduled to be completed at the current date if the budgeted values have been evenly distributed over the activity’s workdays.
This value is calculated in two separate ways depending on which earned value method has been chosen.
The value is calculated as: (Elapsed Workdays / Total Workdays) * 100.
SPI indicates if the progress is ahead of or behind schedule. It is calculated as Earned Value divided by the Budgeted Cost for Work Scheduled (BCWP / BCWS).
The Schedule Variance (SV) indicates whether costs to date are ahead of or behind schedule. It is calculated as the Earned Value minus the Budgeted Cost for Work Scheduled (BCWP − BCWS)
Forecast Days Ahead of Schedule is an estimate of the number of days a project is behind or ahead of schedule. It is calculated as: Total Days - Forecast Duration Days.
Forecast Remaining Duration Days is an estimate of the number of days left until the project is completed. This value is calculated as the number of days from the current date (system date) to the forecast early finish date.
Forecast Duration Days is based on the activity's total days and is an estimate of the time impact if work continues at the current rate of earned value.
The Forecast Early Finish Date is a forecast of the early finish date. It is determined using the Early Start date and adding Forecast Duration Days - 1.
Here follows an example to illustrate the practical use of different project management metrics.
In this scenario, a construction company is managing the development of a
new office building. The project has a Budget at Completion (BAC) of $10,000,000
and is scheduled to be completed in 12 months. The project is approximately
halfway through, and the project manager is analyzing the cost and schedule
performance metrics to assess the project’s progress and financial health.
| BAC | ACWP | BCWP | CPI | CV | EAC | VAC |
| $10,000,000 | $4,500,000 | $5,000,000 | 1.11 | $500,000 | $9,009,009 | $990,991 |
To date, the Actual Cost of Work Performed (ACWP) is $4,500,000. This can be compared to the Budgeted Cost of Work Performed (BCWP), which is $5,000,000. This indicates that the project has spent less than what was planned for the work completed so far.
The Cost Performance Index (CPI), calculated by dividing BCWP by ACWP, is 1.11. This value indicates cost efficiency, as the project is spending less than budgeted for the work performed. Additionally, the Cost Variance (CV), calculated as BCWP minus ACWP, is $500,000. A positive CV means the project is under budget by $500,000 for the work completed to date.
Another important metric to consider is the Variance at Completion (VAC).
The VAC is calculated as the Budget at Completion (BAC) minus the Estimate
at Completion (EAC). With an EAC of $9,009,009, the VAC is $10,000,000 -
$9,009,009 = $990,991. A positive VAC indicates that the project is under
budget.
| BCWS | SPI | SV | Forecast Duration Days | Forecast Remaining Duration Days | Forecast Early Finish Date |
| $5,500,000 | 0.91 | -$500,000 | 401 days | 219 days | February 6 |
The Budgeted Cost of Work Scheduled (BCWS) is $5,500,000, representing the budgeted cost scheduled to be completed to date. Comparing this with the Budgeted Cost of Work Performed (BCWP) of $5,000,000 indicates that the project is behind schedule.
The Schedule Performance Index (SPI), calculated by dividing BCWP by BCWS, is 0.91. This indicates that the project is progressing at 91% of the planned rate. An SPI of less than 1 signifies that the project is behind schedule. Similarly, the Schedule Variance (SV), calculated as BCWP minus BCWS, results in -$500,000. A negative SV indicates that the project is behind schedule by $500,000.
The original project duration was 365 days. However, due to the project
being behind schedule with an SPI of 0.91, the total forecast duration has
increased to 401 days, causing a delay of about 36 days. The forecast
remaining duration is approximately 219 days. Considering the project’s
Early Start date and the Remaining Forecast Duration, the forecasted early
finish date of the project is calculated to be February 6.
The project is showing positive cost performance, as indicated by the Cost Performance Index (CPI), Cost Variance (CV), and Variance at Completion (VAC). These metrics suggest that the project is currently under budget, which can indicate efficient resource utilization and effective cost management. However, being under budget may also suggest that the initial budget was overestimated or that certain planned activities have not yet been executed, potentially leading to future cost increases or quality compromises.
Conversely, the project is facing challenges with its schedule performance. The Schedule Performance Index (SPI) and Schedule Variance (SV) indicate that the project is behind schedule. This delay could result in increased costs due to extended use of resources and potential penalties for late delivery. Additionally, prolonged project timelines can affect stakeholder satisfaction and may lead to missed opportunities or revenue losses. Addressing schedule delays by identifying their root causes, such as resource constraints, unforeseen obstacles, or inefficiencies, is essential to ensure the project meets its intended completion date. Implementing corrective actions, such as reallocating resources, adjusting project plans, or enhancing communication and coordination among team members, may be necessary to bring the project back on track.
Overall, while the project’s financial health appears robust, the schedule performance issues highlight the need for a balanced approach to project management. Ensuring that cost efficiency does not come at the expense of timely delivery and quality is vital. Continuous monitoring and proactive management of both cost and schedule performance will be key to the successful completion of the project.