Tools You Can Use: Construction Project Success Measurements

Tools You Can Use: Construction Project Success Measurements

One of the best ways to ensure success on both current and future projects is to have a concrete way to measure your results. Those results involve whether a project is moving according to expected timelines and whether the actual cost is comparable to the budgeted costs. Three great tools to use in measuring performance are the Schedule Performance Index, the Cost Performance Index and the Critical Ratio.

The Schedule Performance Index, or SPI, measures the how much work is completed on time. SPI is expressed as the ratio of the budgeted cost of work performed (BCWP) to the budgeted cost of work scheduled (BCWS):

SPI = BCWP/BCWS

A project with a SPI greater than 1.0 indicates that the project is ahead of schedule. A consistently high value for SPI is actually not a good thing. This indicates that either the project schedule or budget was unrealistic.

If the project SPI is less than 1.0, the project is behind schedule. Similarly, a consistently low value for SPI is also not desirable. This indicates that the original budget and schedule were unrealistically low and that not enough time was allowed to complete the project. If you manage similar projects on an ongoing basis, the SPI should approach 1.0 as you become more experienced and apply lessons learned from earlier projects.

When using the Schedule Performance Index keep in mind that the value generated considers all tasks, not just those on the critical path, so that non-critical tasks are not ignored. The SPI does not take into account if a project’s critical path is on schedule. Critical path is a term used in project management that refers to the “path” of project activities that add up to the longest overall duration. This path is “critical” because all the tasks on it must be done on time or the project will not be completed on time.

In addition, the SPI ignores tasks that do not require budgets such as submittals and materials ordering. Also remember that SPI is used in conjunction with critical path analysis and with the Cost Performance Index or CPI. The Cost Performance Index measures the relationship between the budgeted cost of work performed (BCWP) and the actual work performed (ACWP) as a ratio:

CPI = BCWP/ACWP

A project with a CPI greater than 1.0 indicates that actual cost is less than budgeted cost or that the project is under budget. A CPI less than 1.0 indicates that the project is over budget. As with SPI, consistently high or low CPI values indicate that the starting assumptions should be reviewed.

Lastly, compare the Schedule Performance and Cost Performance indices to each other to determine the Critical Ratio (CR):

CR = SPI x CPI

Charted values for CR should fall randomly on both sides of 1.0. As with the SPI and CPI indices, you will want to evaluate trends in CR to ensure that its value stays within the predetermined acceptable range. Taken together, the Schedule Performance Index, Cost Performance Index and Critical Ratio are wonderful management tools to help ensure that your projects are on track for success.