Cost Performance Index (CPI) compares the value of completed project work with the cost incurred to complete it.
Definition
CPI is an earned value measure calculated as the budgeted value of completed work divided by the actual cost of that work. A result of 1.0 means earned value and cost are equal under the project’s measurement rules. A result below 1.0 means the work’s measured cost exceeds its budgeted value; above 1.0 means it is below that value. Firms need a consistent way to measure progress and assign project costs for the ratio to be useful. Some use labor and other costs, while others include a broader cost base or apply different progress rules. CPI is a snapshot that can inform a forecast, but it does not predict final cost on its own. It is not the project’s margin, contract fee, or cash position. Owners can pair it with an estimate at completion and review assumptions when scope or progress changes.
How owners use it
- Compare a project’s cost efficiency across reporting periods using the same progress and cost rules.
- Use CPI with an estimate at completion to identify whether the forecast may need revision.
- For example, $80,000 earned value / $100,000 actual cost = 0.80 CPI, meaning measured cost is greater than earned value.
- Review the underlying progress and cost entries when CPI changes sharply between reports.
