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

Schedule Performance Index (SPI) and Cost Performance Index (CPI) allow you to assess the project’s performance.

Schedule performance and cost performance are the two most important parameters of your project. SPI and CPI help you analyze the efficiency of any project.

Management is always looking at these parameters for any deviations from the baseline. Deviations from the baseline cost a great deal in project management. Therefore, it is important that you understand these concepts well.

Since these concepts involve mathematical calculations, many aspirants ignore them. Once you understand the math, solving questions on the PMP exam will be easy for you.

Schedule Performance Index (SPI)

The Schedule Performance Index (SPI) shows how you are progressing compared to the planned project schedule.

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 gives you information on the time efficiency of your project.

The Formula for the 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

You can conclude that:

The completed work is equal to the planned work if the SPI is equal to one; the project is on schedule.

  • You have completed more work than planned if the SPI is greater than one; the project is ahead of schedule.
  • If you have completed less work than planned work if the SPI is less than one. The project is behind schedule.
  • The completed work is equal to the planned work if the SPI is equal to one; the project is on schedule.

Make sure you consider 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.

Example of Schedule Performance Index (SPI)

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) = 60,000USD

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 6 months have passed. In this situation, you can assume the budget was distributed evenly for each month. Therefore, in 6 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

Hence, 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 to analyze the cost efficiency of the project. It measures the value of the work completed compared to the actual cost spent.

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 specifies how much you are earning for each dollar spent on the project. It shows how well the project is sticking to the budget.

The Formula for the 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

You can conclude that:

  • You are earning more than what you have spent if the CPI is greater than one. The project is under budget.
  • You are earning less than what you have spent if the CPI is less than one. The project is over budget.
  • Earning and spending are equal if the CPI is equal to one. You can say that 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 budget of the project is 100,000 USD. 6 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 budget or over budget.

The following information is given in the question:

Actual Cost (AC) = 60,000USD

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

This means you are earning 0.67 USD for every 1 USD spent since the Cost Performance Index is less than one. This means you are over budget.

You have studied variance (SV and CV) and indexes (SPI and CPI). If you think that both sets of parameters provide the same information, you are wrong.

Both are required because there is a difference between variances and indexes; the former provides you with the difference between the two values and the latter gives 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 the project with another, even if your organization has many projects.

Therefore, you use the Performance Indexes to compare the health of a project among many projects. The Performance Index is the ratio between the parameters, and a glimpse of these ratios will help you determine the health of the project. This makes it easier for you to compare the relative health of projects. You can find efficiency through indexes.

Cost Performance Index and Schedule Performance Index Comparision Table

cost performance index CPI and schedule performance index SPI comparison table

Cost Performance Index and Schedule Performance Index Comparision Chart

schedule performance index and cost performance index chart

Summary

Schedule Performance Index and Cost Performance Index help you analyze the progress of a project. These measures can help you determine if you are performing up to standard. You are doing well if the ratio is higher than one. If the ratio is less than one, there is a problem with the project, and you should take corrective action. In ideal conditions, the ratio should be one.

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: