Cost performance index stability: insights from environmental remediation projects

Denis S Clayson,Alfred E Thal ,Edward B White

doi:10.1108/jdal-11-2017-0024

Abstract

Purpose The purpose of this study was to investigate the stability of the cost performance index (CPI) for environmental remediation projects as the topic is not addressed in the literature. CPI is defined as the earned value of work performed divided by the actual cost of the work, and CPI stability represents the point in time in a project after which the CPI varies by less than 20 percent (measured in different ways). Design/methodology/approach After collecting monthly earned value management (EVM) data for 136 environmental remediation projects from a United States federal agency in fiscal years 2012 and 2013, the authors used the nonparametric Wilcoxon signed-rank test to analyze CPI stability. The authors also used nonparametric statistical comparisons to identify any significant relationships between CPI stability and independent variables representing project and contract characteristics. Findings The CPI for environmental projects did not stabilize until the projects were 41 percent complete with respect to project duration. The most significant factors contributing to CPI stability were categorized into the following managerial insights: contractor qualifications, communication, stakeholder engagement, contracting strategy, competition, EVM factors, and macro project factors. Originality/value As CPI stability for environmental remediation projects has not been reported in the literature, this research provides new insights to help project managers understand when the CPIs of environmental remediation projects stabilize and which factors have the most impact on CPI stability.

Highlights

Cost growth has historically been a major problem for the US federal government (US GAO, 2013)
We found four variables related to the instructions provided in request for proposals (RFPs) that had a significant impact on cost performance index (CPI) stability: the number of pages in Section L, the weighting of evaluation criteria, past performance rank, and key personnel rank
This research has provided important insight into when the CPIs of environmental remediation projects typically stabilize and which factors significantly contribute to CPI stability

Summary

Introduction

Cost growth has historically been a major problem for the US federal government (US GAO, 2013). . .] that coordinates the work scope, schedule, and cost goals of a program or contract, and objectively measures progress toward these goals” (PARCA, 2014) It combines cost, schedule and performance into an integrated program baseline that provides managers a roadmap to help execute projects. When using the range method, the CPI is considered stable when the project is 20 percent complete With the interval method though, the CPI is considered stable when the project is 25 percent complete This is the earliest point at which all subsequent CPI observations are within plus or minus 0.10 of the CPI at that point. At 25 percent complete, the CPI is 1.20 and all subsequent CPI observations fall between 1.10

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Conclusion