Sunday, March 04, 2012

What is the Health of your Project?

Takeaway: I have seen a number of status reports in my one of my earlier organizations. And mostly it is % of completion of each feature. However, does it really convey the status? I am sure, it does not. Here, we will have a simple question to know the status of the project. 

To know the status of the project, you need to simply ask only these two:

1. What is the SPI for your project?
2. What is the CPI for your project?


If SPI and CPI are below 1.0, then the project is not in good health, i.e., not performing well. 

The calculation for these is also known as EVM, i.e, Earned Value Measurement. 

SPI: Schedule Performance Index
CPI: Cost Performance Index

To understand it, we will use a simple example. 

Example: Say you have a project, which will have to complete 6 modules. Cost of each module is $10,000. And you have to complete the project in 6 months. After 3 months, you find that 2 modules have been completed and the current cost for the project is at $35,000. Now find out the values of SV, CV, SPI, and CPI. 

Answer: We will use EVM here to calculate. 

BAC = Budget At Completion - The planned budget for the entire project 
EV = Earned Value - The value being earned by the project with the current work completed till date. 
PV = Planned Value - The expected value of work to be completed till date. 
AC = Actual Cost - The actual cost incurred for this project till date.

And all will be calculated in terms of money. This will somewhat difficult to understand initially. However, it will be clear shortly. 


These are basic EVM metrics. 

BAC = 6 modules and each of $10,000 = 6 * $10,000 = $60,000
EV = 2 modules completed = 2 * $10,000 = $20,000
PV = [(6 modules/ 6 months) * 3 months] * $10,000 = $30,000 
AC = $35,000

The performance indices are:

SPI = Schedule Performance Index = EV/PV = $20,000 / $30,000 = 2/3 = 0.667 
CPI = Cost Performance Index = EV/AC = $20,000 / $35,000 = 4/7 = 0.557

Analysis: 

With SPI as 0.667, it means that for every 1 day effort I am getting a return of 0.667 day of work. 

With CPI as 0.557, it means that for every 1 dollar spent on the project, I am getting a return of 0.557 dollar. 

With these indices, it means that the project is under schedule and over budget. And it needs remedial actions.

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