This blog post is the fourth blog post in a series of seven on earned value management and project forecasting.

If you’re coming here from a search engine or a referral, please read through my previous three blog posts before reading this post, there is relevant background material.

Here are the links for these blog posts:

Schedule Performance Index (SPI) and Cost Performance Index (CPI), like variances, allow you to assess the health of a project.

In specific, SPI and CPI help you analyze the efficiency of schedule performance and cost performance of any project.

### Schedule Performance Index (SPI)

The Schedule Performance Index indicates how efficiently you are actually progressing compared to the planned project schedule.

As per the PMBOK Guide, “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 about the schedule performance of the project. It is the efficiency of the time utilized on the project.

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

The Schedule Performance Index can be determined by dividing earned value by planned value.

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

SPI = EV / PV

With the above formula, you can conclude that:

- If the SPI is greater than one, this means more work has been completed than the planned work. In other words, you are ahead of schedule.
- If the SPI is less than one, this means less work has been completed than the planned work. In other words, you are behind schedule.
- If the SPI is equal to one, this means work is being completed at about the same rate as planned, you are on time.

While calculating the Schedule Performance Index, make sure that you consider all tasks. Sometimes you may only consider the tasks on the critical path while ignoring the rest, this will cause an erroneous result.

Therefore, ensure that non-critical activities are included.

**Example of the Schedule Performance Index (SPI)**

*You have a project to be completed in 12 months and the budget of the project is 100,000 USD. Six months have passed and 60,000 USD has been spent, but on 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 behind or ahead of schedule.*

Given in the question:

Actual Cost (AC) = 60,000 USD

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

=50,000 USD

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

Since the Schedule Performance Index is less than one, you are behind schedule.

### Cost Performance Index (CPI)

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

As per the PMBOK Guide, “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. The Cost Performance Index is an indication of how well the project is remaining on budget.

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

The Cost Performance Index can be determined by dividing earned value by actual cost.

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

CPI = EV / AC

With the above formula, you can conclude that:

- If the CPI is less than one, you are earning less than the amount spent. In other words, you’re over budget.
- If the CPI is greater than one, you are earning more than the amount spent. In other words, you are under budget.
- If the CPI is equal to one, this means earning and spending are equal. You can say that you are proceeding exactly as per the planned budget spending, although this rarely happens.

**Example of the Cost Performance Index (CPI)**

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

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

Given in the question:

Actual Cost (AC) = 60,000 USD

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

Since the Cost Performance Index is less than one, this means you are earning 0.67 USD for every 1 USD spent. In other words, you are over budget.

A consistently high or low value of SPI or CPI is an indication that something is wrong with your planning and/or cost estimates. If this is the case, check all assumptions and estimates for accuracy and take corrective action as needed.

**What is the difference between Cost Variance, Schedule Variance and Cost Performance Index, and Schedule Performance Index?**

After studying the variances and indexes, you might be thinking that if both sets of equations (i.e. variances and indexes) provide the same information, why not discard one set of equations? Why not take only variances into account, or just performance indexes?

In fact, both are required, because there is a difference between variances and indexes. With variances, you find the difference between the two values. With indexes, you get the ratio between the two values.

In cost or schedule variance, the result comes in dollar form. If this number is negative, you say that the project is in bad shape. However, if this number is positive, you say that the project is in good shape. The problem with variance is that you cannot compare the health of the project with another project if your organization has many projects.

Therefore, you use the Performance Indexes to compare the health of the project among many projects. The Performance Index is the ratio between the parameters, and only a glimpse of these ratios will be sufficient to determine the health of the project. This makes it easier for you to compare the relative health of all projects.

Moreover, to get the efficiency, you need indexes.

### Summary

As with variances, indexes help you analyze the progress of a project. With the help of indexes, you can quickly find out whether you are performing well or poorly. If the ratio is greater than one, you are doing well, and if the ratio is less than one, there is a problem with the project and you should take corrective action.

In the next blog post we will discuss forecasting techniques: Estimate at Completion, Estimate to Complete, and To Complete Performance Index.

If you are interested in learning all the mathematical formulas for the PMP exam, you can try my PMP Formula Guide. You can also try my PMP Question Bank and PMP Mock Test to practice PMP exam sample questions.

Lai says

Quick question on this scenario:

It is the end of the project already and SPI is 0.9. Which is the best answer?

– The project is behind the schedule

– The project did not complete all the activities and is behind schedule

Fahad Usmani says

What is the difference between these two?

Sowmya says

You found the following earned value analysis information for a project that was recently closed-out:

SPI = 0.7, CPI = 1.0

What is the answer from the below options

a. The project has been cancelled while it was executed. At that time the project was behind schedule and on budget

b. The project’s deliverable have all been finished. The project came in behind schedule but on budget.

Fahad Usmani says

You are behind the schedule and on budget. So the answer “a” would be correct.

Adam says

Hello

I don’t understand how can I know that a project has been terminated early using SPI and CPI?

An example from an exam:

Why the correct answer for the question: Post-mortem analysis after scheduled finish date of a project shows a CPI of 0.7 and SPI of 1.44. What is a plausible explanation for that?

The right answer is:

The project was terminated early. At that time, it was over budget and ahead of schedule.

Thanks

Fahad Usmani says

The data shows you are ahead of schedule and over budget.

What are the other options?

Nisim says

I found another question from Oliver free preparation exam:

You found the following earned value analysis information for a project that was recently closed out: SPI = 0.7 , CPI = 1.0

A. The project has been cancelled while it was executed. At that time the project was behind schedule and on budget.

B. The project’s deliverable have all been finished. The project came in behind schedule but on budget.

C.The project’s deliverable have all been finished. The project came in ahead of schedule but on budget.

D. The project’s deliverable have all been finished. The project came in on schedule but over budget.

Correct answer is A. Why is that?