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Construction Project Performance Metrics
Conference Paper · June 2002
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Construction Project Performance Metrics
By Douglas D. Gransberg, PE, CCE and Monica E. Villarreal-Buitrago
Abstract
The purpose of this paper is to outline the methods used to measure construction project
performance and compare their relative effectiveness. The study looked at many common
metrics and analyzed their application to a database containing over 1,500 public construction
projects from nine states. It found that some of the most common metrics are not as valuable in
measuring actual construction project performance between categories than previously thought.
The paper recommends that a series of metrics that measure salient aspects of a given
construction program be developed and used in conjunction with one another to give the
construction manager a true measure of project performance.
Keywords: Construction, project performance, metrics, benchmarking, project controls
Introduction
Measuring construction project performance is an important piece of the project management/
project controls process and must be taken very seriously. The industry has historically used
measures of change from the original contract’s time and cost as its cardinal performance metrics
[8]. While these metrics certainly are well-used and well understood, they suffer from a lack of
clarity as to what they are actually portray with respect to project performance. The change in a
project’s time and cost are typically called time growth and cost growth [9, 10]. They are
generally represented as either a positive or negative a percentage of original contract
requirements. While these are indeed useful measures, they do not numerically indicate the
reason for the change from original nor do they assign responsibility for that change. For
example, a project with a high level of construction cost growth could be suffering from a very
poor original design that necessitated the issuance of costly change orders. This is not fault of
the construction contractor. Conventional wisdom would rule that the project is “going sour” and
generally ascribe responsibility to the constructor [3]. On the other hand, the same cost growth
could be the function of a costly unforeseen site condition or act of God over which neither party
to the contract has control.
On the other hand, a negative value of both time and cost growth is generally seen as beneficial
and the project is usually ruled “successful” [3]. For instance, if an owner decides to remove a
feature of work from the original contract, both time and cost growth will become negative
because the owner has reduced the scope of work from the original. However, by building less
than originally contracted, the project performance metrics will both be negative and the project
will be thought to have finished “ahead of schedule” (negative time growth) and “under budget”
(negative cost growth).
The other issue with the use of project performance metrics is their individual applicability for
the type of construction that they are measuring. Construction project can generally be
categorized into vertical construction (architectural and other building-type projects) and
horizontal construction (highways, railroads, bridges, etc,) [10]. The two types have different
contractual bases. Vertical projects tend to have firm-fixed price contract where the construction
contractor must furnish a lump sum bid for the scope of work portrayed in the plans and
specifications and time is measured against a contract completion date. On the other hand,
horizontal projects are typical unit price contracts where the contractor will furnish a bid price
for each pay item in the schedule of work and be paid the actual quantities of work installed.
Time is usually measured using charge days (days on which the contractor was able to work) [2,
5]. This difference makes it more difficult for a project manager to measure project performance
on horizontal projects than on vertical ones using conventional performance metrics. As
contractors bid based on planned quantities and get paid based on actual quantities, the concept
of cost growth is no longer valid as it is entirely possible to have a project that was both properly
designed and efficiently build and merely had the actual qualities overrun the planned quantities.
Time growth also becomes less discreet. A negative time growth could mean that the owner
overestimated the time requirement. This was amply demonstrated in a study of Texas
Department of Transportation (TxDOT) projects done in 1995 [4] that found that the average
TxDOT project finished nine days early.
Thus, project manager or cost engineer must truly understand the dynamics of the metrics that
they are using to measure project performance to be able to properly apply them. This is
critically important when one looks above the project level and tries to apply these metrics to an
on-going program of many projects [5]. Studies of this nature are often undertaken to evaluate
the impact of innovative project delivery techniques such as the introduction of formal partnering
or the implementation of Design-Build (DB) upon a program’s performance with respect to both
time and cost. As a result, this paper attempts to statistically evaluate the ability of ten
commonly used project performance metrics to actually portray a trend with respect to project
performance. The metrics will be defined and then applied to a database of over 1,600 public
projects from six different states. Horizontal projects will be separated from the vertical projects
to evaluate the value of each metric to measure project performance in these do categories. It is
hoped that the reader will be able to take this research and be able to more knowledgably apply it
to his or her own construction program.
Project Performance Metrics
There three types of project performance metrics: relative, static, and dynamic. Relative metrics
are expressed as a percentage and as a result are independent of the size of a project. This allows
the cost engineer to directly compare the performance of small projects with the performance of
large projects. The cost and time growth metrics discussed above are typical examples of
relative metrics. The second type is static metrics. These metrics are discreet numerical
measures that do not change with time. As a result, they are project size dependent, and the cost
engineer can only use them to compare projects that are roughly the same size. Cost per square
foot of constructed area and charge days per lane-mile of highway are examples of static metrics.
Finally, dynamic metrics are those that vary with time. Dynamic metrics are also project size
dependent. These metrics are generally a function of both cost and time. Some include cost,
time and a function of physical size. As a result of their mathematical complexity, cost engineers
must understand the limitations of each and every metric that they choose to use to measure
project performance.
Relative Metrics
The following are three common Relative metrics that were evaluated in this study: time growth,
cost growth and award growth. There are others such as disputes cost percentage, average cost
growth due to liquidated damages and average time growth due to liquidated damage days which
were not evaluated [5].
Time growth is the percentage change in time between the final contract time and the original
contract time, expressed as a percentage. Time growth can be positive or negative depending on
the outcome of the project. In fact, time growth change according with the scope of the project.
When time growth is positive it means that the project was performed using more time than
estimated, and therefore, the project was finished late. When time growth is negative the
project’s time growth was overestimated, that is the project was completed before than the
original contract time.
Final contract time Original contract time
Time Growth equation 1
Original contract time
Where: Time Growth (percent)
Final contract time (days)
Original contract time (days)
Cost growth is the percentage change in cost between the final contract cost and the original
contract cost, expressed as a percentage. Cost growth can be positive or negative, when cost
growth is positive there were changes orders increasing the cost of the project during its
performance. Otherwise, if cost growth is negative, the original contract cost was possibly
overestimated or the actual scope of work was reduced.
Final contract cos t Original contract cos t
Cost Growth equation 2
Original contract cos t
Where: Cost Growth (percent)
Original contract Cost ($)
Final contract cost ($)
Award Growth is an indicator of the feasibility of awarding a construction project to public
companies. It is defined by the difference between original contract cost, and engineer’s
estimate divided by the engineer’s estimate. Prior to the advertisement, the engineer’s estimate
needs to be calculated. This estimate is done for the owner and indicates how much money the
project will require. The owner then obtains financing in this amount hoping that the project’s
actual bid price will be less than the engineer’s estimate. A positive award growth indicates that
the owner’s financing is insufficient and may have caused a delay while additional funds were
obtained. This is especially true for public projects where agencies typically have to return to
legislative bodies for increases in project authorizations amounts [6]. Negative award growth
indicates that the owner has fenced money against project requirements that were not realized.
This often reduces the annual size of an agency’s annual construction program by obligating
available funding that is not used [6]. Award growth is an excellent measure of how well an
owner understands the market in which it must construct its facilities.
Original contract cos t Engineer ' s estimate
Award Growth equation 3
Engineer ' s estimate
Where: Award Growth (percent)
Original contract cost ($)
Engineer’s estimate ($)
Static Metrics
Static metrics are size dependent and do not vary with time. While most project managers focus
on the elements of construction cost, it is also instructive to include functions of design cost. A
poorly developed design will manifest its deficiencies during the construction process. Thus, a
life cycle approach to project performance metrics is in order, measuring the project’s progress
from concept to ribbon cutting. The below are the static metric that were evaluated in this study.
Design unit cost determines the average cost per linear mile for horizontal projects or square-foot
of constructed area for vertical projects. This value is obtained by dividing the design cost by the
size.
Design Cost
Design Unit Cost equation 4
Size
Where: Design Unit Cost ($/SF or mile)
Design Cost ($)
Size (SF or mile)
Construction unit cost determines the average cost per linear mile or square-foot of constructed
area. It is the measure obtained by dividing the final construction cost by the size.
Final Construction Cost
Construction Unit Cost equation 5
Size
Where: Construction Unit Cost ($/SF or mile)
Final Construction Cost ($)
Size (SF or mile)
Design-Build (DB) Cost is the total amount obtained with the sum of design cost and final
construction cost, which measure the total amount of the design and construction contract.
DB Cost Design Cost Final Construction Cost equation 6
DB unit cost can be analyzed for horizontal and vertical projects in miles or SF respectively. It
determines the average cost on a project for unit designed and built which is obtained by dividing
the DB cost by the size.
DB Cost
DB Unit Cost equation 7
Size
Where: DB Unit Cost ($/SF or mile)
DB Cost ($)
Size (SF or mile)
Dynamic Metrics
Dynamic metrics are size dependent and vary with time. Dynamic metrics typically combine
cost and time and sometimes size. They are used to measure the efficiency of project
performance [6]. Again, both the design and construction phases of a project can be measured
and used to give the cost engineer an idea of how efficiently the work is proceeding. Placement
has been used for years by the Army Corps of Engineers to measure construction progress
against an agency standard [6].
Design placement is the average cost per day of a design contract. It is obtained by dividing the
design contract cost by the design contract time.
Design Contract Cost
Design Placement equation 8
Design Contract Time
Where: Design Placement ($/day)
Design Contract Cost ($)
Design Contract Time (days)
Construction placement is the measure obtained by dividing the final construction cost by the
final construction time; therefore, construction placement measures the average rate at which the
contractor earns value over the entire period of a construction contract. The effective and
efficient construction management is obtained with a high value in construction placement.
Final Construction Cost
Construction Placement equation 9
Final Construction Time
Where: Construction Placement ($/day)
Final Construction Cost ($)
Final Construction Final Time (days)
DB placement is the total amount obtained with the sum of design cost and final construction
cost divided by the total time period between the start of the design and the completion of the
construction contract.
DB Cost
DB PLacement equation 10
Design Build Time
Construction intensity is an attempt to mathematically combine cost, time and size into a single
metric. It can be used to measure both horizontal and vertical projects. It is the average cost per
linear mile or square-foot of constructed area per unit time [8]. Dividing the final construction
cost by the size, and dividing this final value by the final construction time obtain intensity.
Intensity
Final Construction Cost / Size equation 11
Final Construction Time
Where: Intensity ($/SF or mile/day)
Final Construction Cost ($)
Size (SF or mile)
Final Construction Time (days)
Methodology
Each of the above metrics was calculated for every project in the database. The results of the
metrics were then graphed against project cost and project time. A metric that shows a strong
relationship to either the project’s dollar size or its construction period is one where the cost
engineer can use that relationship to establish project financial features such as contingencies and
cash flow plans. Linear regression was then used to fit a line to the scatter plot, and an R 2-value
was calculated to indicate goodness of fit. This value was then used as the measure of a
particular metric’s ability to portray project performance. Those metrics that had a high relative
R2-value were determined to be good measures of project performance. The projects in the
database were first separated into horizontal and vertical categories to identify those metrics
which best measure performance in each category. Tables 1 and 2 below show the results of the
metrics tested for the two project categories.
Table 1: Horizontal Projects
Construction
Placement
Placement
placement
Construct
Unit Cost
Intensity
DB Cost
DB Unit
ion Unit
Growth
Growth
Growth
Award
Design
Design
Time
Cost
Cost
Cost
DB
Parameter
Average 9.32% 4.88 % -1.91% 105,440 2,529,234 6,085,401 2,616,875 563 21,954 6,112 9,635
σ 44.00% 19.31% 9.82% 192.820 4,698,128 8,386,056 4,892,968 751 21,973 7,568 13,341
Skew 2.52 4.18 -1.25 3.45 3.56 3.27 3.56 2.31 2.23 2.42 4.38
R2 (cost) 0.0332 0.0004 0.0231 0.4356 0.4520 .9739 0.4531 0.9055 0.4882 0.9273 0.2350
2
R (time) 0.0174 0.0001 0.0857 0.1568 0.1497 0.2153 0.1539 0.1166 0.0074 0.2099 0.0499
No. of projects 543 1,049 401 378 413 448 411 437 507 420 382
Table 2: Vertical Projects
Construction
Placement
Placement
placement
Construct
Unit Cost
Intensity
DB Cost
DB Unit
ion Unit
Growth
Growth
Growth
Award
Design
Design
Time
Cost
Cost
Cost
DB
Parameter
Average 25.29% 5.21% -3.60% NA 128 6,043,002 134 492 10,866 5,728 NA
σ 44.95% 15.57% 25.76% NA 25 5,497,603 35 522 8,559 5,267 NA
Skew 1.15 5.80% -9.43 NA 0.48 2.19 0.46 2.96 1.85 2.06 NA
2
R (cost) 0.0127 0.0017 0.0811 NA 0.0175 0.9733 0.5614 0.0359 0.8403 0.4459 NA
2
R (time) 0.153 0.0264 0.1426 NA 0.0043 0.0284 0.0331 0.1121 0.0276 0.0215 NA
No. of projects 70 463 381 NA 13 49 6 42 69 48 NA
Note: The data was not available to calculate Design Unit Cost and Intensity for Vertical
Projects.
Results
By comparing time growth and original construction cost on 543 horizontal projects, it was
found that there is not a significant correlation (R 2=0.033) between these two variables, which
means that it is not a good metric to predict the behavior of time in projects’ perform. This was
also the case for cost growth (R2=0.0004) and award growth (R2=0.0231). Additionally, the
large standard deviations and skewness measures indicate that the use of relative metrics is not a
function of either project dollar size or construction period. Thus, the idea espoused at the
beginning of this paper that the values of these metrics are probably a function of parameters that
are not under the control of the construction contractor and/or the owner is supported.
The static metrics faired better with R2 values in the 0.4 range. However, this indicates a weak
relationship with both dollar size and time. The dynamic metrics had the best correlation with
respect to cost. However, this is to be expected, as largest number in the equation for each
metric is the cost number. However, it is interesting to note that the combination of both time
and cost improve the statistical correlation for horizontal projects.
The results for vertical projects were even less conclusive. R 2 values were only strong for DB
cost and construction placement. DB cost can be discounted as the construction cost is the
largest component of the two costs added to arrive at the DB cost. Thus, the R 2 value should be
nearly 1.00. The R2 value of 0.82 for construction placement, while not statistically significant
on a R2 value > 0.95 basis, is still significantly greater than the rest of the metrics. Thus, it can
be said that construction dollar size explains about 82% of the variation in construction
placement [1].
Conclusions
The comprehensive study of project performance metrics showed that by and large project
performance is largely a function of something other than the project’s estimated cost or project
execution time period. The value of this study is to clearly demonstrate that the selection of
project performance metrics to measure the effectiveness of a specific construction program is
not something that can be taken lightly. While it was beyond the scope of this particular study, it
can be speculated that if the same analysis was run on projects from a single public owner that
the R2 values would increase due to the homogeneity of the program’s contractual context and
the elimination variation due geographic dispersion in the database.
Secondly, it can be concluded that a program manager should select a battery of metrics rather
than a single one with which to measure a large construction program. The evidence given by
the measures of dispersion in the various metrics shows that a multi-project program must have
several ways to gauge its effectiveness to confidently make informed project management
decisions.
Finally, the fact that most of the metrics did not correlate with project dollar size or construction
period came as a surprise to the authors of this study. The one parameter that could not be
measured from this database was a measure of technical complexity of the project. If project
performance is not a function of size or time, then the only non-human variable left is technical
complexity. An unrelated study done for TxDOT in 1999 by the author found that the
experience people who executed the project were the factor that had the strongest correlation
with the technical success of the project [7]. While there is nothing in this project performance
metrics study to indicate that the quality of the personnel would create a statistical correlation for
any given metric, that factor should probably be kept in mind when making business judgments
based on project performance metric output..
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