Key Performance Indicators (KPIs) to Define Success in Fixed-Price Projects

A company or business relies upon several analytical measurements. These are to quantify and collate its performance through strategic planning and operational goals. Those business-oriented analytical parameters are termed Key Performance Indicators (KPI) or Key Success Indicators (KSI). Businesses use different Key Performance Indicators (KPIs) depending on their industries.

Graph: Financial Ratio KPI Dashboard Showing Revenue Net Profit Margin and Debt to Equity Enhance Alignment

KPIs use data to predict the success of a fixed-price project. By understanding KPIs, one can figure out the strong and weak parts of projects earlier. 

These initial insights into the project assist in avoiding a catastrophe. As KPIs rely on quantifiable data, applying them in fixed-price projects can determine the condition of your project. The limitations of fixed-price projects make it challenging for them to succeed. On the other hand, implementing KPIs simplifies project tracking.

Here, we will discuss why KPIs are significant for fixed-price projects.

Why are KPIs Important in Fixed-Price Projects?

Effective management is crucial in projects with fixed prices due to the predetermined investment of time and money. KPI implementation can help achieve project goals with finite resources. With KPI implementation, a fixed-price project will achieve-

• Risk Management

Fixed-price projects are risk-prone for various reasons, such as resource constraints, scope changes, and external factors. Risk management KPIs can predict the risk level. The experts analyze the data to solve the matter without hampering the project.

• Project Monitoring and Control 

KPIs provide measurable data to project leaders, who can identify possible threats and control the project flow. Metrics enable adjustments to achieve project goals.

• Client Satisfaction

Client satisfaction is crucial to success in fixed-price projects. KPIs related to real-time client satisfaction and feedback tracking can improve it.

• Cost Management

Cost performance related to KPIs, such as budget variance, helps project leaders control costs and make informed decisions to tackle cost overflow. 

• Quality Assurance

Quality-related KPIs quantifiably represent the quality of the products and services. They help identify areas that need improvement, thus maintaining and enhancing the quality of the deliverables. 

Maintaining quality within a restricted time and budget is problematic for businesses. Therefore, utilizing KPIs related to the industry in fixed-price projects will benefit in tracking the progress. 

Client-Side KPIs and Their Relevance in Fixed-Price Projects

Client-side KPIs use interactions and satisfaction to assess a client's performance and effectiveness in a business. KPIs make understanding many facets of user experience, engagement, and happiness more accessible. If clients understand the requirements clearly, they can optimize the ongoing projects to meet them.

In fixed-price projects, KPIs related to Cost and Budget, Schedule and Delivery, and Quality and Functionality matter the most. The following client-side KPIs and their applicability are listed- 

1. Cost and Budget KPIs:

Clients always aim to stay within their project budget and allocated costs. However, tracking expenditures without implementing metrics is impossible. 

• Project Cost Variance (PCV) 

It explains the financial performance of the fixed price. Clients can derive the PCV by finding the difference between the Actual Cost of Work Performed(ACWP) and the Budgeted Cost of Work Performed (BCWP). 

In a perfect project, the difference should be 0. Therefore, clients can make informed decisions when the values differ, increasing the differences between ACWP and BCWP. 

• Cost Performance Index (CPI)

The KPI measures the financial efficiency and effectiveness of the fixed-price project. By implementing the KPI, clients can measure the completed work on every unit of money spent. 

Clients can calculate the CPI by getting the Budgeted Cost of Work Performed (BCWP) ratio and the Actual Cost of Work Performed(ACWP) ratio. An ideal project’s CPI value should always be higher than 1. A value decreasing from 1 indicates that the project is draining the budget. 

• Profit Margin

This KPI gives insight into the project’s profitability to date. Clients can measure it to derive the project's long- and short-term success. The profit margin can be calculated by deducting the total cost from the revenue and dividing the difference by the revenue. 

A significant profit margin shows the project's success and generates value for the parties involved in the work. 

2. Schedule and Delivery KPIs

In fixed-price projects, on-time delivery and scheduling are significant in deciding the overall project success. By implementing KPIs to track the delivery progress, the client can ensure time for project completion.

• Schedule Performance Index (SPI)

It measures the time the project will be completed, compared to the time pre-decided during the initial stage. The client can calculate the SPI ratio by dividing the Earned value by the Planned value. 

If the ratio is 1, then the project is performing on time. A value of more than 1 means the project is ahead of schedule, and a value of less than 1 indicates the project is lagging. Based on the data, clients can take the necessary steps to maintain the project flow. 

• On-Time Completion

Fixed-price projects are time-sensitive. Implementing this KPI will allow you to measure the percentage of work completed. This data will help maintain project speed and calculate the project completion time.  

• Milestone Achievement 

Fragmenting the entire project into small parts will help calculate its flow. By passing each milestone within the given time, this KPI ensures that the project will be delivered on time. 

3. Quality and Functionality KPIs

Client satisfaction is paramount in any fixed-price project. Therefore, clients can adhere to certain KPIs to retain quality and functionality.

• Defect Rate

It measures the number of defects found during quality testing divided by the total number of deliverables. A low defect score implies that the deliverables are of the best quality. As the score lowers, it signifies that the team is also working correctly and there is no need to rework. 

• Client Satisfaction Score

This KPI gathers feedback from users and customers regarding their experience with the product or service, such as quality and communication. A high satisfaction score means the project is meeting expectations. If the score is lower than expected, necessary steps can be taken to combat the downfalls. 

• Requirements Compliance 

It helps to calculate the extent of the deliverables and whether they meet their functionality or expectations. Each project has some particular objectives. This KPI ensures that the project is meeting those expectations and client satisfaction.

These KPIs are directly related to the success of any fixed-price project. Apart from that, incorporating Scope Creep KPI can assess sudden changes in project scopes, ROI assesses the project profits, and Resource Utilization measures how efficiently the resource is being used up. Every project has individual needs and objectives.

However, in fixed-price projects, focusing on cost and budget, schedule and delivery, and quality and functionality, along with specialized KPIs, can increase the project's success. A good set of KPIs can help clients track project performance, mitigate risks, and make necessary decisions to achieve the best outcome.  

How Cubet Helps?

The BIA application monitors a streamlined task management system that allows the workers to review, accept, or reject their assigned tasks according to their capability and limitations, maintaining a standardized working environment. 

However, it also faces-

• Work discontinuity due to project transition in the midway
• Scalability and performance challenges due to rapid growth in the database
• Complication in task scheduling due to an increasing job volume
• Incomplete time tracking of workers, resulting in payroll errors
• Troubleshooting issues due to inaccurate analytical tools

So, when it came to Cubet, we implemented some KPIs suitable for the application to address the issues.

• Ensuring quality and consistency through meticulous code reviews.
• Lodging and using the growing data to strengthen database architecture.
• Revamping the job planner to enhance UX and features reduces page loading time. 
• Monitoring accurate time tracking by implementing an electronic clock-in and clock-out facility.
• Scanning real-time data flow and system performance by designing diagnostic pages. 

By incorporating those KPIs, it became easier to analyze the data and take necessary actions, resulting in 

• A lightweight application with optimized codes, enhanced performance, and reduced resource overhead.
• A reliable platform with better database performance and system scalability. 
• Amplified UX for effortless task management and navigation.
• Alert monitoring for timely issue detection and finding solutions.
• Punctuality among workers, ensuring quality work and transparency in payrolls. 

Adding these KPIs, increased the worker's output, enhanced the workflow, improved user experience, and the BIA application became more scalable.

The Pitfalls of Poor KPI Selection

So, it is easy to understand the role of KPIs in business, especially in fixed-price projects. A poor set of KPIs can lead to

• Mismatched Goals resulting in compromised project outcomes.
• Limited Visibility hinders effective risk management and decision-making. 
• Inadequate Measurement leads to issues with project completion and payment.
• Unforeseen Dependencies cause client dissatisfaction and long-term issues with clients. 
• Static Evaluation holds the project's success back.

Choosing the right KPIs is prime for mitigating these KPI pitfalls. Implementing measurable, relevant, and adaptive KPIs can solve the problem. Additionally, upgrading KPIs with time and factors is necessary to achieve success in a fixed-price project.

Use KPIs to Achieve Success in Your Fixed-Price Project

Achieving success in a Fixed-Price project depends on a practical set of KPIs. They benefit the business and help strategize current and future projects.

KPIs are crucial to keep a project on track using detailed data from various sources. 

Therefore, incorporating KPIs meticulously into your business will ensure the success of any fixed-price project. 

Following all the parameters and going by the strict budget and time, it is difficult to handle a fixed-price project. However, it can be easier and more manageable with the right approach and tools. Cubet offers some active project management tools that can make tracking your fixed-price projects easier. With their KPIs, you can set your goals and monitor the project's progress anytime. From setting completion dates to standardizing budget allocation, you can easily access all the relevant information from your project dashboard.