**Cost Performance Index (CPI)**

The Cost Performance Index helps you to analyze the cost efficiency of the project. It measures the value of the work completed compared to the actual cost spent.

According to theintactone, “The Cost Performance Index (CPI) is a measure of the cost efficiency of budgeted resources, expressed as a ratio of earned value to actual cost.”

The Cost Performance Index specifies how much you are earning for each dollar spent on the project. It shows how well the project is sticking to the budget.

**The Formula for the Cost Performance Index (CPI)**

You can calculate the Cost Performance Index by dividing the earned value by actual cost.

Cost Performance Index = (Earned Value) / (Actual Cost)

CPI = EV / AC

You can conclude that:

Earning and spending is equal if the CPI is equal to one. You can say that the project is proceeding as per the planned spending.

- You are earning more than what you have spent if the CPI is greater than one. The project is under budget.
- You are earning more than what you have spent if the CPI is greater than one. The project is under budget.
- Earning and spending is equal if the CPI is equal to one. You can say that the project is proceeding as per the planned spending.

**Example
**

You have a project to be completed in 12 months, and the budget of the project is 100,000 USD. 6 months have passed, and 60,000 USD has been spent, but upon closer review, you find that only 40% of the work has been completed.

Find the Cost Performance Index for this project and deduce whether you are under budget or over budget.

The following information is given in the question:

Actual Cost (AC) = 60,000USD

Planned Value (PV) = 50% of 100,000 USD = 50,000 USD

Earned Value (EV) = 40% of 100,000 USD = 40,000 USD

Now,

Cost Performance Index (CPI) = EV / AC

= 40,000 / 60,000

= 0.67

Hence, the Cost Performance Index is 0.67

**Schedule Performance Index (SPI)**

The Schedule Performance Index (SPI) shows how you are progressing compared to the planned project schedule.

According to theintactone, “The Schedule Performance Index (SPI) is a measure of schedule efficiency, expressed as the ratio of earned value to planned value.”

The Schedule Performance Index gives you information on the time efficiency of your project.

**The Formula for the Schedule Performance Index (SPI)**

You can find the Schedule Performance Index by dividing Earned Value by Planned Value.

Schedule Performance Index = (Earned Value) / (Planned Value)

SPI= EV / PV

You can conclude that:

The completed work is equal to the planned work if the SPI is equal to one; the project is on schedule.

- You have completed more work than planned if the SPI is greater than one; the project is ahead of schedule.
- If you have completed less work than planned work if the SPI is less than one. The project is behind schedule.
- The completed work is equal to the planned work if the SPI is equal to one; the project is on schedule.

Make sure you consider all tasks while calculating the Schedule Performance Index. Sometimes, you may only consider those on the critical path and ignore the rest, which will give you an incorrect result.

Therefore, make sure that non-critical activities are included.

**Example
**

You have a project to be completed in 12 months, and the budget is 100,000 USD. Six months have passed, and 60,000 USD has been spent, but upon closer review, you find that only 40% of the work has been completed so far.

Find the Schedule Performance Index and deduce whether the project is ahead or behind of schedule.

Given in the question:

Actual Cost (AC) = 60,000USD

Planned Value (PV) = 50% of 100,000 USD =50,000 USD

In the question, the Planned Value is not given. However, the project duration is 12 months and 6 months have passed. In this situation, you can assume the budget was distributed evenly for each month. Therefore, in 6 months, 50% of the budget will have been spent.

Earned Value (EV) = 40% of 100,000 USD = 40,000 USD

Now,

Schedule Performance Index (SPI) = EV / PV

= 40,000 / 50,000 = 0.8

Hence, the Schedule Performance Index is 0.8

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