7.4.9 Setting up Performance Indicators

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To be able to monitor a project’s implementation and judge its performance against the objectives and targets set, it is necessary to use a set of indicators, which might be decided during the Planning Phase, so that data on them can be collected. Indicators are usually quantitative measures but may also be qualitative observations. They define how performance will be measured along a specific scale, without specifying a particular level of achievement. The various levels of indicators are as follows12 [ "Indicators for monitoring and evaluation"- European Commission -Directorate General XVI]:

Financial indicators are used to monitor progress in terms of the commitment and payment of the funds available for the project in relation to its cost.
Output indicators relate to activity. They are measured in physical units (eg. Length of road constructed)
Result indicators relate to the direct and immediate effect brought about by a project. They provide information on changes to, for example, the behaviour, capacity or performance of direct beneficiaries. Such indicators can be of a physical nature (reduction of journey times, number of successful trainees, number of road accidents etc) or of a financial nature (e.g. decrease in transportation cost)
Impact indicators refer to the consequences of the project beyond the immediate effects on its direct beneficiaries (effects occurring after a certain lapse of time but which are nonetheless directly linked to the action taken).

Financial and output indicators can be used to monitor the progress of a project while the result and impact indicators can be used to evaluate the projects outcome at the post project period.


Example 7-12: Possible indicators for a major infrastructure project (e.g. road construction)





Construction of road


Financial: cost

Physical: km constructed


Reduced journey time

Reduced transport cost

Time savings in min

Cost saving (%)

Specific impact

Increased flows of persons and goods

Traffic flows


Using the indicators defined above, one can also measure concepts such as effectiveness and efficiency.

Effectiveness compares what has been done with what was originally planned i.e. it compares actual with expected or estimated outputs, results and/or impacts
Efficiency looks at the ratio between the outputs, results and/or impacts and the inputs (particularly financial resources) used to achieve them.

The Table that follows shows the complementarity between indicators and the measurement of effectiveness and efficiency.


Table 7-4: Complementarity between indicators and measurement of effectiveness and efficiency





Operational objective

Financial/ physical output

Actual/planned output

Output compared to cost

Specific objective


Actual/planned results

Result compared to cost

Global objective


Actual/planned impacts

Impact compared to cost


In order to plan the use of performance indicators both for monitoring the progress of the project and for evaluating it, the Project Manager has to follow the following steps:

Establishment of the Performance Indicators
Establishing the process for monitoring the performance indicators.



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