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Using CPI Forecast to Predict the Performance of Your Project

Using CPI Forecast to Predict the Performance of Your Project

4castplus Construction Cost Tracking Software - Using CPI Forecast to Predict the Performance of your Project

Before I get started on the details, I’ll give you a quick definition: A CPI Forecast allows project controls professionals to predict the performance of their project using a subjective CPI value rather than the calculated CPI that’s determined based on past performance.

What is a CPI Forecast?

In case you’re wondering what that all means, I’ll go on to explain.  First, CPI stands for “Cost Performance Indicator" (or Index). It’s a standard EVM metric, and is calculated using the following formula:
CPI = Earned Value (EV) / Actual Cost (AC)

A CPI Forecast is a mechanism for providing a subjective view on the standard calculation. Using EVM for calculating the remaining costs to complete on a project - like ETC and EAC - typically use the project's latest Progress Measurement as a basis for that calculation.  This is effectively using past performance to predict the future.  What it's saying is, for example, "Judging from where you're at right now, your project is underperforming at a performance index of 0.8.  With that performance to day, your ETC will be $X."

While this is important information for project analysis and forecasting, users often need an alternative way to view these projections. It may be the case that there are very good reasons for the poor performance to date, and corrective action has been taken – so that the performance metric of 0.8 might be misleading. Or maybe, unforeseen circumstances had dragged performance for a while, and things are looking better now for the remainder of the project.

An alternative view to forecast remaining costs to complete

To give you an example, let’s say that the first 6-months of a project occurred during winter; when progress moves slower than it does during the spring and summer.  A project manager wouldn’t want to only use winter’s performance to predict what will happen during the upcoming spring and summer – so he’ll want to put in his own performance indicator (CPI) as an alternative view to forecast remaining costs to complete. By exposing a “CPI Forecast”, the project manager can insert his own subjective view of what the project’s future performance will look like.  And therefore, what the Estimate to Complete will be.

We wouldn’t suggest that we take away the calculated CPI, since it provides key information. What we’re discussing, is the need to provide an additional, predictive view to the upcoming CPI of the project. This allows project managers to compare the two, and justify his/her take on how the project is projected to play out.

Report on calculated and forecasted values in reports and timeline charts

In 4castplus, users can enter regular progress measurements and the system will calculate a CPI throughout the WBS hierarchy based on standard EVM formulas. The system will also report the calculated ETC - Estimate to Complete. Users can then enter a forecasted CPI or a forecasted ETC for any activity in the WBS, and the system will report on both the calculated and forecasted values in all reports and timeline charts.

 

By Charlie Rose | August 31, 2016 | Categories: budgeting and forecasting software, construction estimating software, Construction management software, construction project management, Construction project management software, Construction Tracking Software, Earned Value Management, earned value management, earned value management software, EVM, project accounting, project controls, Project Cost Controls, Project Progress, Real-time project cost tracking, construction cost tracking software, cost control software, construction job cost software, progress measurement, measuring project progress, Estimate-to-Complete, calculating progress, costs to complete, CPI Forecast, construction project manager, evm software, cost management, information management | 0 Comments

About the Author: Charlie Rose

Charlie Rose

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