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The Director of PMO was reviewing his project portfolio which is $1,000,000. If he has 10 projects all purported to have the same budgeted value and the Cost Performance index looks like the following: .8, 1.0, 1.2, .75, .9, 1.0, 1.25, .95, 1.4, and 1.3; what does the overall average tell about his total planned cost or budget?
His portfolio is above planned cost
His overall portfolio has a cost performance index that is negative
His portfolio is on planned cost for 2 projects
His portfolio is under planned cost
Let's first look at the definition of Cost Performance Index; a value >1 shows under planned cost, a value<1.0 is over planned cost, and a value=1.0 is on planned cost. The average of the 10 project CPI is 1.055 which indicates the overall portfolio is under planned cost. Portfolio under planned cost correct as the Overall Ave CPI>1.0 indicates under planned cost. Portfolio above planned cost is incorrect as Overall Ave CPI>1 is under not above planned cost. on planned cost for 2 projects is partially correct as 2 projects are on plan but the question was overall ave of CPI which is under planned cost. Negative cost performance index is incorrect as CPI is a ratio which can only be positive with a value <=1>. (PMBOK 2013 Rev 5th Edition, pgs 217-225).
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