Cost performance index (CPI): what it is and what a good CPI looks like

What CPI measures

CPI is one of the core ratios of earned value management. It needs two numbers, both measured to the same date:

• Earned value (EV): the budgeted cost of the work actually completed. If a $10,000 work package is 40% done, it has earned $4,000, whatever it actually cost.
• Actual cost (AC): what you really spent to do that work.

The formula is CPI = EV / AC. Read it as "value earned per dollar spent". A CPI of 0.85 means every dollar spent produced 85 cents of planned work. A CPI of 1.10 means every dollar produced $1.10 of planned work.

Its partner is the cost variance, CV = EV - AC, which gives the same signal as an amount of money rather than a ratio. CPI is better for comparing work packages or projects of different sizes; CV is better for telling a sponsor how much money is at stake. For the full method, see the earned value management guide.

How to calculate CPI, step by step

1. Fix the status date. All numbers must be cut off at the same date.
2. Measure progress per work package with an agreed rule: units completed, milestones reached, 0/100 or 50/50 for short tasks, or a physical percent complete. Do not use "percent of budget spent" as progress; that makes CPI equal 1.0 by definition.
3. Calculate EV for each package as budget times percent complete, then add them up.
4. Collect AC for the same packages and the same period, including accrued costs for work done but not yet invoiced.
5. Divide. CPI = EV / AC, for each package and for the whole project.

Worked example

A project has a budget at completion (BAC) of $400,000. At the end of month 4 the numbers are:

Measure	Value
Planned value (PV)	$140,000
Earned value (EV)	$120,000
Actual cost (AC)	$150,000

• CPI = 120,000 / 150,000 = 0.80. Each dollar is buying 80 cents of planned work.
• CV = 120,000 - 150,000 = -$30,000.
• If performance continues like this, the estimate at completion is EAC = BAC / CPI = 400,000 / 0.80 = $500,000, a variance at completion of 400,000 - 500,000 = -$100,000.
• To finish on the original budget, the remaining work must be done at TCPI = (BAC - EV) / (BAC - AC) = (400,000 - 120,000) / (400,000 - 150,000) = 280,000 / 250,000 = 1.12. Going from 0.80 to 1.12 is a large jump, so the honest conclusion is that the budget needs a change or the scope needs a cut.

Now look at the month alone. In month 4 the team earned $40,000 and spent $44,000, so the period CPI is 40,000 / 44,000 = 0.91. That is still below 1.0 but better than the cumulative 0.80, which suggests the corrective actions are starting to work. Report both: cumulative CPI for the forecast, period CPI for the trend.

What is a good CPI?

A good CPI is close to 1.0 and stable. There is no single official threshold, so most teams set their own reporting bands. A typical set looks like this:

Cumulative CPI	Status (example bands)	Typical response
1.05 and above	Blue: check	Confirm costs are complete and the estimate was not padded
0.95 to under 1.05	Green	Normal monitoring
0.90 to under 0.95	Amber	Find the cause by work package, plan recovery
Below 0.90	Red	Escalate, re-forecast EAC, consider a change

Note the first row. A very high CPI is not automatically good news. It often means invoices have not arrived yet, costs were booked to the wrong code, or the estimate had slack in it. Treat a CPI well above 1.0 as a question, not a prize.

Also read CPI next to the schedule performance index (SPI = EV / PV). In the example above, SPI = 120,000 / 140,000 = 0.86: the project is both over budget and behind. A project with CPI 1.1 and SPI 0.7 may be "saving" money only because work is not happening.

Find the cause: CPI by work package

A project CPI tells you that something is wrong; a CPI per work package tells you where. Split the same month 4 numbers by package:

Work package	EV	AC	CPI
Design	$50,000	$48,000	1.04
Procurement	$40,000	$42,000	0.95
Installation	$30,000	$60,000	0.50
Total	$120,000	$150,000	0.80

Design and procurement are close to plan. Installation has spent twice what its progress is worth, so that is where the questions go: is the crew rate wrong, is rework happening, or is progress being under-reported? Fix the cause there instead of asking every team to cut costs.

Common CPI mistakes

• Measuring progress by spend. If percent complete equals percent of budget spent, CPI always reads 1.0 and tells you nothing.
• Timing mismatch. Counting progress to the end of the month but costs only to the last invoice makes CPI look better than it is. Accrue.
• Reporting only the project total. A healthy total can hide one package at 0.7 offset by another at 1.3. Drill down.
• Ignoring the trend. A single month means little. Watch cumulative and period CPI over several months.
• Using CPI as a target for individuals. People will then manage the number (by moving costs or overstating progress) rather than the work.

How to do this in Critova

To try the numbers first, the free earned value calculator takes PV, EV, AC and BAC and returns CPI, SPI, the variances, EAC and TCPI. For a live project, Critova calculates CPI, SPI, SPI(t), the EAC family and TCPI from your schedule progress and cost entries, and shows each value with its formula so anyone reviewing the report can check it. The cost dashboard brings these indices together across a portfolio.