Cost Performance Index Calculator
Answers the Question
Are we spending more than expected for the project?
Calculator for Cost Performance Index
What Is the Cost Performance Index?
This formula is used for earned value management and acts as a predictor of a project to come in at or under budget. A value greater than 1 indicates that a project will come in under budget. A value of 1 indicates that a project will come in at budget. A value less than 1 indicates that a project will come in over budget.
Note: This should not be confused with the term consumer price index.
Why Is it Important?
- Many inexperienced project managers only find out that they're over budget when their checks start bouncing. This formula acts as an early warning signal for projects that might not be proceeding as efficiently as expected.
Formula(s) to Calculate Cost Performance Index
- COST PERFORMANCE INDEX = EARNED VALUE / ACTUAL COST
- Assuming that a project is being run inefficiently just because its CPI is less than 1. A project may be well executed but baselined against inaccurate estimates.
- Not accounting for scope creep. The original estimates may not have accounted for features that were added after execution began.
- Not considering product quality. Some managers will mark poor implementations as complete, only to have to spend additional sums later for rework.