Key Performance Indicators (KPI's for Construction Projects
When you set the project's baselines and start tracking the cost and progress, you must select and implement the most valuable Key Performance Indicators (KPIs). So, you prepare for Earned Value calculations and analysis.
There's no point in these preparations before you finally lock in the baseline. We aim to follow, monitor, and report a project using Earned Value Analysis Calculation.
Earned Value Management develops and monitors three main components for each work package control account or cost account. These principal components are:
• Planned Value (PV). This is the value of the authorized budget (BAC) for the planned work.
• Earned Value (EV). This is the value of the average amount of the planned work package that was approved for this work.
• Actual Value (AV). This is the value of the realized costs for the planned and authorized work package.
These three main components are analyzed and monitored. We do this by comparing and analyzing the differences between the planned value, the realized value, and the current value. These differences are:
Key Performance Indicators
The awareness of key performance indicators in a project or organization is a standard method to measure the organization's performance. And this is also done with tasks.
Measuring is knowing, a lot is being proclaimed, and that is what we will do in this example project. There is a significant disadvantage, psychologically and welfare-wise. I can measure performance in groups or parts of an organization, but I find personal KPIs an issue. I have experienced that personal KPIs can seriously disrupt the cooperation of employees, especially if rewards and bonuses are added.
But I also know that I can't change the world and that an essential part of this book is dedicated to gathering data on which we can measure and assess KPIs.
We generate this data with Earned Value Analyses, and I will show that later in this book. For this example, project, we are going to use the following Key Performance Indicators:
KPIs in EVM
KPI 1) Schedule Variance (SV, project planning variation)
The project planning variation is the difference between the planned value and the realized value of the authorized work. So, the SV is about time.
KPI 2) Cost Variance (CV, cost variation)
The cost variation is the difference between the realized value and the current value of the authorized work. So, the CV is about money.
KPI 3) Schedule performance index (SPI)
The SPI performance index measures the efficiency of the project planning of the planned project planning compared to the Earned value project planning. The formula for the SPI is: SPI = EV/PV. So, this KPI is about time.
KPI 4) Cost Performance Index (CPI)
The CPI performance measurement measures the efficiency of the planned costs against the Earned value costs. The formula for the CPI is: CPI = EV/AC. So, this KPI is about money.
DCMA Key Performance Indicators
He has designed a standard for measuring the health of a project. This standard has fourteen assessment criteria, but for this project I only use the last two. These are:
the Critical path length index (CPLI) and the Baseline Execution Index (BEI). These four KPIs are EVM's most common performance measures, but there are others, and I take them from the U.S. Defense Contract Management Agency (DCMA).
KPI 5) Critical path length index (CPLI)
Description: The critical path index calculates how efficient the project progress is relative to the original time baseline. An outcome equal to or greater than 1 indicates that the project is making good progress and running efficiently. An effect smaller than 1 tells that there are problems with the progress of the project and that it will be challenging to complete the project on time. DCMA has a tolerance of 0.95. The formula we use for this is as follows:
CPLI = (CPL +/- Float)/ CPL
CPL is the total length of the project's critical path (in days). The float (this can be a positive or negative float) is the number of days we have as a play (negative or positive) between the mandatory end date of the project and the forecasted end date.
An example:
Let's assume that we are running a project with a total length of 180 days and that the project is 20 days behind schedule. This is then a negative float of 20 days. → CPLI = (180 - 20)/ 180 = 160/180 = 0.889
Another example:
Let's assume that the total length of the project is 100 days and the buoyant float is 20 days.
→ CPLI = (100 + 20) / 100 = 120/100 = 1.2
KPI 6) Baseline Execution Index (BEI)
Description: the calculation of the Baseline Execution Index (BEI). The BEI is the ratio between the number of activities that are ready to the number of activities that should have been completed. The project is going well if the proportion is greater than or equal to 1.0. A ratio of less than 1 indicates that the project end date is at risk. DCMA has a tolerance of 0.95.
Do you like to know more? Read my books, Projecten Praktijkgericht Plannen, Projectbeheering in Bouwprojecten and PrimaveraP6 Practical scheduling & Planning
Jan van den Berg
June 2024
