Contract Over Target Baseline (OTB) Effect on Earned Value Management's Cost Performance Index (CPI)
Abstract : Cost growth is a problem in U.S. Department of Defense (DoD) acquisitions. A particular component of cost growth is a cost overrun or Over Target Baseline (OTB). In 2009, Trahan found that the Gompertz growth curve better predicted program Estimates at Completion (EAC) for OTB contracts. In 2010, Thickstun studied "the relationships between overruns and a variety of factors," but found OTB occurrences "random" and questioned the benefit of the OTB process (Thickstun, 2010). In this research, we study OTB's ability to effect improved program cost performance; we examine OTB's effect on the cumulative Cost Performance Index (CPI) slope after an OTB intervention. We find there is no statistically significant change in cumulative CPI slope after OTB. For the data studied, an OTB investment does not significantly improve management's ability to earn cost value as reflected in the cumulative CPI slope.
Why Should CPI = 1?
The expectation when applying Earned Value Management is to control performance such that CPI = 1.00. This paper examines that premise. Two influences are identified: schedule and risk. Each is shown to have negative impact on CPI. Recognizing how the influence is exhibited, an alternative management approach is proposed.
Application of resource allocation optimisation to provide profitable options for dairy production systems
A linear program (LP) model analysed resource use on a 100 ha dairy farm. A single optimum-profit combination was established for resources which were either optimised or constrained. It was found that, with a fixed herd of 320 milking cows, when production increased from 305 kg milksolids per cow (kg MS/cow) to 415 kg MS/cow, cash profit increased by 65%. This required additional supplements. If, however, feed demand and supply were optimised at 415 kg MS/cow, the LP reduced milking cow number rather than buy in feed to meet the increased feed demand from higher production per cow. At all production levels chosen between 305 and 415 kgMS/cow, it was most economic to dry off and cull cows early in dry summers to optimise feed demand vs. feed grown; use nitrogen (N) fertiliser to avoid a feed deficit only when response rates of better than 10 kgDM to 1 kg N could be expected; not use N for growing supplements to harvest. Pasture cover, within defined constraint levels, provided a buffer for feed demand and supply fluctuations. The study highlights the importance of assessing production, income and cost in an integrated framework to identify the point at which individual resources become limiting.