Schedule Performance Index (SPI) Cost Performance Index (CPI)

The schedule performance index and cost performance index are important metrics used to measure the project’s progress. By seeing these figures in the progress reports, stakeholders will know how the project is progressing and whether any necessary corrective or preventive actions are required.

In today’s blog, we will discuss these performance parameters with formulas and examples so you can understand them well.

Schedule Performance Index (SPI)

The schedule performance index (SPI) shows how you are progressing as compared to the planned project schedule. The schedule performance index gives you information on your project’s time efficiency.

According to 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 is the ratio of earned value to planned value. It shows the schedule efficiency of the project. The performance duration can be a specific period or a complete project.

Formula for 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

Make sure that you add 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.

How to Calculate Schedule Performance Index

You will first find the earned value and then the planned value. Afterward, you will divide the earned value by the planned value. The result is the schedule performance index.

“Earned value” is the value of completed work, and “planned value” is the value of the work as per the plan.

SPI Interpretation

As the SPI is a ratio, it can be equal to one, less than one, or more than one.

You can interpret the SPI in the above three cases as follows:

  • If the SPI exceeds one, then the project is ahead of schedule. You have completed more work than planned.
  • If the SPI is less than one, then the project is behind schedule. You have completed less work than planned.
  • If the SPI is equal to one, then the project is on schedule. The completed work is equal to the planned work.

Schedule Performance Index (SPI) 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 schedule.

Given in the question:

Actual Cost (AC) = 60,000 USD

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 six months have passed. In this situation, you can assume that the budget was distributed evenly each month. Therefore, in six 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

Therefore, the schedule performance index is 0.8.

You are behind schedule since the schedule performance index is less than one.

Cost Performance Index (CPI)

The cost performance index helps you analyze the project’s cost efficiency. It measures the value of the work completed as compared to the actual cost spent. 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.

According to 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 is the ratio of earned value to actual cost. It shows the cost efficiency of the project. The performance duration can be a specific period or a complete project.

Formula for Cost Performance Index (CPI)

You can calculate the cost performance index by dividing the earned value by the actual cost.

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

CPI = EV / AC

How to Calculate Cost Performance Index

You will first find the actual cost spent and then the earned value. Afterward, you will divide the earned value by the actual cost. The result is the cost performance index.

Earned value is the value of completed work, and the planned value is the value of the work as per the plan.

CPI Interpretation

As the CPI is a ratio, it can be equal to one, less than one, or more than one.

You can interpret the CPI in the above three cases as follows:

  • If the CPI is greater than one, then the project is under budget. You are earning more than you have spent.
  • If the CPI is less than one, then the project is over budget. You are earning less than you have spent.
  • If the CPI is equal to one, then the project is proceeding as per the planned spending.

Example of Cost Performance Index (CPI)

You have a project to be completed in 12 months, and the project 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.

Find the cost performance index for this project and deduce whether you are under or over budget.

The following information is 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

Therefore, the cost performance index is 0.67.

This means you are earning 0.67 USD for every 1 USD spent since the cost performance index is less than one. Therefore, you are over budget.

Cost Performance Index and Schedule Performance Index Comparison Table

The following table shows the difference between SPI and CPI.

ItemSchedule Performance IndexCost Performance Index
DefinitionSPI measures the efficiency of time utilization in a project. It is the ratio of the earned value (EV) to the planned value (PV).CPI measures the efficiency of cost utilization in a project. It is the ratio of the earned value (EV) to the actual cost (AC).
FormulaSPI = EV / PVCPI = EV / AC
InterpretationSPI < 1: Behind schedule; SPI = 1: On schedule; SPI > 1: Ahead of scheduleCPI < 1: Over budget; CPI = 1: On budget; CPI > 1: Under budget
EmphasisEmphasizes time performance and project scheduling.Emphasizes cost performance and budget management.
ImportanceImportant for projects in which meeting deadlines is critical.Important for projects in which staying within budget is critical.

Cost Performance Index and Schedule Performance Index Comparison Chart

The below comparison chart shows SPI and CPI graphically. Project managers use this chart to review the progress and communicate with stakeholders. 

This chart shows how the project is progressing regarding cost and schedule performance and recommends corrective and preventive actions.

schedule performance index and cost performance index chart

How SPI & CPI Differ from SV & CV

You have studied variance (i.e., SV and CV) and indexes (i.e., SPI and CPI). However, these sets of parameters do not provide the same information.

Both are required because there is a difference between variances and indexes: the former provides the difference between the two values, and the latter provides a ratio.

The result comes in dollar form in cost or schedule variance. A negative variance means the project is in trouble. However, the project is in good shape if the variance is positive. The problem with variance is that you cannot compare the health of one project with another, even if your organization has many projects.

Therefore, you will use the performance index to compare the health of a project against many other projects. The performance index is the ratio between the parameters. A glimpse of these ratios will help you determine the project’s health, which will make it easier to compare the relative health of many projects. Therefore, indexes increase efficiency.

Summary

Schedule performance index and cost performance index help you analyze the project’s progress. These measures can help determine whether your performance is up to standard. You are doing well if the ratio is higher than one. If the ratio is less than one, then there is a problem with the project, and you should take corrective action. In ideal conditions, the ratio should be one.

This point is important from a PMP exam point of view.

This blog post is the fourth in a series of seven on Earned Value Management and project forecasting. Please read through my previous three posts before reading this post if you’re coming here from a search engine or a referral.

The following are the links for other blog posts:

Fahad Usmani, PMP

I am Mohammad Fahad Usmani, B.E. PMP, PMI-RMP. I have been blogging on project management topics since 2011. To date, thousands of professionals have passed the PMP exam using my resources.