Probabilistic Evaluation of Cost Performance Stability in Earned Value Management

Abstract

Credibility of cost performance analyses and forecasts for effective control of construction projects depends on the stability of the cost performance index (CPI) as a leading indicator of future performance. This paper presents a simulation-based analytical model that evaluates the probability that the CPI of an individual project becomes stable at a particular time during the project’s duration. The CPI stability model is used to identify four cost stability driving factors, and their compounding effects are examined by a parametric study. A real-project application demonstrates that the CPI stability is an indicator of the overall project performance risk and thus, the specific conditions of each project must be properly accounted for in a CPI stability assessment. This paper contributes to enhancing the credibility of all CPI-based analyses in earned value management by providing insights into the underlying factors of cost performance stability and an analytical tool for assessing the CPI stability and the CPI stabilization time of individual projects. Consequently, the cost performance stability can be predicted, planned, and controlled in each project.