CPI and SPI

The cost performance index (CPI) is a measure of the conformance of the actual work completed (measured by its earned value) to the actual cost incurred: CPI = EV / AC. The schedule performance index (SPI) is a measure of the conformance of actual progress (earned value) to the planned progress: SPI = EV / PV. In both of the above formulas, a value of 1.0 indicates that the project performance is on target. When CPI or SPI are greater than 1.0, this indicates better-than-planned project performance, while CPI or SPI less than 1.0 indicates poorer-than-planned project performance. The formulas used to calculate the CPI and SPI indices are generally based on cumulative costs.

The inverse of the above formulas are used in forecasting (Anbari, 1980; Egan, 1982; Cioffi, 2002; Webster, 2002). Dividing the forecasted budget by the current CPI gives a prediction of the final budget if performance continues at the same rate. A similar computation can be performed using the SPI.

However, just as the schedule variance is a function of time, SV(t), by analogous reasoning, the schedule performance index must be a function of time also, SPI(t). And of course, this also means that the cost performance index must be a function of time as well, CPI(t).

Graphs of the variances and performance indices over time provide valuable information about trends in project performance. When corrective actions are implemented, the changes in the behavior of the indexes reveal the impact of the changes. Such graphs can be very effective in project reviews. However, examining and analyzing the changes in the parameters begs the question of how they change over time. For example, “What is the baseline change in CPI over time, and how does it compare to the measured performance?”