Contract over Target Baseline (OTB) Effect on Earned Value Management\u27s Cost Performance Index (CPI)

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