How do you communicate CPI results and trends to stakeholders and sponsors?
As a project manager, you know how important it is to monitor and control the cost performance of your project. One of the most widely used tools for this purpose is the Earned Value Management (EVM) method, which compares the planned and actual costs and values of the work done. A key indicator of cost efficiency in EVM is the Cost Performance Index (CPI), which is the ratio of earned value (EV) to actual cost (AC). A CPI of 1 means that the project is on budget, a CPI greater than 1 means that the project is under budget, and a CPI less than 1 means that the project is over budget. But how do you communicate CPI results and trends to your stakeholders and sponsors, who may not be familiar with EVM or may have different expectations and concerns? Here are some tips to help you present CPI information in a clear, concise, and meaningful way.
Before you dive into the numbers, make sure that your audience understands what CPI is, how it is calculated, and what it means for the project. You can use simple definitions, examples, and visuals to illustrate the concept and show how it relates to other EVM metrics, such as schedule performance index (SPI), budget at completion (BAC), and estimate at completion (EAC). You can also explain the benefits and limitations of using CPI, such as how it can help identify variances, forecast future performance, and assess the impact of changes, but also how it can be affected by factors such as scope creep, inaccurate estimates, or external events.
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Keep in mind that not all CPIs greater than 1.00 is a good sign. LOE tasks that are above 1.00 can indicate a shortage of staffing at the project and lower levels.
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I used EVMS in my projects. I ensured stakeholders understand CPI. I explained that a CPI over 1 signifies healthy spending, below, adjustments are needed. I also simplified key metrics like SPI, BAC, and EAC for better comprehension."
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For DoD and DOE projects, CPI trends are communicated through DCMA EVMS Compliance Metric (DECM) and DOE Project Assessment and Reporting System (PARS), respectively, adhering to the EIA-748 standard. Historically, both agencies utilized IPMRs, and some grandfathered projects continue to do so, leveraging Formats 1 and 5 to deliver insights into project health to include CPI analysis. Additionally, EVM metrics like CPI can be used to compar it with TCPIeac to evaluate the realism of the Estimate at Completion (EAC). This comparison provides essential data for strategic decision-making and ensures stakeholders are well-informed, thus supporting compliance and effective project management.
Instead of focusing on a single CPI value at a given point in time, show how the CPI has changed over the course of the project and what it indicates about the cost performance trend. You can use graphs, charts, or tables to display the CPI values over time and compare them with the baseline or target values. You can also use indicators such as the cumulative CPI (CPIc), which is the average of all CPI values up to a certain date, or the to-complete performance index (TCPI), which is the required CPI for the remaining work to meet a specified budget goal. By highlighting the trends, you can help your audience see the bigger picture and understand how the project is progressing and whether it is likely to meet its cost objectives.
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To highlight trends to stakeholders, use clear visual representations such as graphs or charts showcasing the trajectory of the Cost Performance Index (CPI) over time. Additionally, provide a brief narrative explaining the direction and significance of the trends. Use terms like "improving efficiency" for an increasing trend and "potential cost challenges" for a decreasing trend. Ensure your communication is concise, emphasizing the impact on project costs and any corresponding actions taken or planned.
After showing the CPI results and trends, you should provide some analysis and explanation of why they are what they are. What are the main factors or events that have influenced the cost performance of the project? What are the positive and negative variances and how significant are they? What are the root causes of the variances and how can they be addressed or prevented? You can use tools such as variance analysis, cause-and-effect diagrams, or Pareto charts to identify and prioritize the sources of cost inefficiency and their impact on the project.
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To analyze the causes of trends in the Cost Performance Index (CPI), delve into various project aspects. Evaluate factors like changes in scope, resource allocation, unexpected events, or inaccurate initial estimates. Conduct a root cause analysis to pinpoint the primary drivers of CPI trends. This comprehensive assessment will enable informed decision-making and targeted corrective actions.
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After explaining CPI, and ensuring the team understands what the metric is, I like to begin the Five Why's. Ask what is driving the variance, then continue asking 'Why?' until you are able to determine the root cause.
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In short, I’ve found both internal and external customers appreciate going beyond the “what” of a poor CPI and explaining the “why”. For example, if a task is costing more than budgeted and the “what” is higher level personnel are needed for the effort, take the next step and provide the “why” these higher level personnel are needed.
Based on your analysis of the CPI results and trends, you should propose some actions or recommendations to improve the cost performance of the project or to mitigate the risks or issues that may affect it. What are the best practices or lessons learned that can be applied to the project? What are the corrective or preventive actions that can be taken to bring the project back on track or to maintain its positive trend? What are the contingency or reserve plans that can be activated in case of unforeseen circumstances or changes? You should also explain how your recommendations align with the project scope, schedule, quality, and stakeholder expectations, and what are the expected benefits or outcomes of implementing them.
Finally, you should invite your audience to provide feedback on your CPI presentation and your recommendations. You should encourage them to ask questions, share their opinions, raise their concerns, or suggest their alternatives. You should also acknowledge their feedback and address it in a respectful and constructive way. By soliciting feedback, you can foster a collaborative and transparent relationship with your stakeholders and sponsors, and ensure that they are engaged and informed about the cost performance of the project.
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CPI is the main driver of schedule performance. Separate discreet tasks from LOE and material in analysis. Cost of progress on the deliverable should be the focus. Insist on cost info in labor hours. Compare CPI in hours to time phased resource demand profiles from the IMS. Schedule does not drive cost until the project is late and extra costs that accumulate with time are experienced. An accurate EAC is not possible without that variable. Remember capacity measured by throughput over tune is a limiting factor. Capacity should be a known variable. Historical EV data can be used to determine it.
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