An Investigation of the Stability of the Cost Performance Index
AIR FORCE INST OF TECH WRIGHT-PATTERSONAFB OH
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This study examines the stability of the Cost Performance Index CPI . The CPI is and indicator of the cost performance efficiency achieved on a contract and is used to analyze cost performance on defense contracts. It has long been asserted that the index does not change by more than 10 percent after a contract is 50 percent complete, but an exhaustive literature search did not locate any empirical work that supports this assertion. Knowing that the CPI is stable is important because it indicates that a contractor has a healthy management system, it increases the reliability placed in the contractors planning process, it gives confidence in our Estimate at Completion computations, and if a contractor is overrunning his budget, it gives confidence when declaring the contractor in trouble. After defining CPI stability two methods to test for stability were developed. The two methods chosen were first, to measure the range of the CPIs that occurred at greater than 50 percent complete and second, to calculate a percentage interval and verify that the CPI is stable after a contract is 50 percent complete.
- Administration and Management
- Economics and Cost Analysis