Cost Performance Index (CPI)
DE: Kostenleistungsindex (CPI)
A measure of cost efficiency expressed as EV / AC.
Detailed Explanation
CPI measures cost efficiency as the ratio of earned value to actual cost (CPI = EV / AC). It is the most critical EVM metric for assessing whether a project is getting value for its spending.
CPI of 1.0 = on budget; >1.0 = under budget (favorable); <1.0 = over budget. Research shows that once CPI falls below 0.8 after 20% completion, recovery is extremely unlikely.
CPI is used in forecasting: EAC = BAC / CPI assumes current cost efficiency continues. This makes CPI invaluable for early warning and proactive corrective action.
Key Points
- Formula: CPI = EV / AC
- 1.0 = on budget; >1.0 under; <1.0 over
- Most important EVM cost indicator
- Below 0.8 at 20% completion rarely recovers
- Used in EAC forecasting: EAC = BAC / CPI
- Track alongside SPI for complete health picture
Practical Example
At month 4 of a EUR 500K project: EV = EUR 120K, AC = EUR 150K. CPI = 0.80 — for every euro spent, only 80 cents of value is earned. EAC = 500K / 0.80 = EUR 625K, a potential EUR 125K overrun. The PM investigates: inefficient vendor contracts and rework from unclear requirements.
Tips for Learning and Applying
Track CPI weekly during execution
If CPI drops below 0.90, investigate immediately
Use both cumulative and period CPI to distinguish trends from one-time events
Always report CPI alongside SPI
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