Difference between revisions of "Cost Performance Index (CPI)"
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The '''cost performance index (CPI)''' is a measure of the financial effectiveness and efficiency of a project. It represents the amount of completed work for every unit of cost spent. | The '''cost performance index (CPI)''' is a measure of the financial effectiveness and efficiency of a project. It represents the amount of completed work for every unit of cost spent. | ||
| − | As a ratio it is calculated by dividing the budgeted cost of work completed, or earned value, by the actual cost of the work performed. | + | As a ratio, it is calculated by dividing the budgeted cost of work completed, or earned value, by the actual cost of the work performed. |
| − | For example, if a project has | + | For example, if a project has an earned value (EV) of £20,000 but actual costs (AC) were £12,000: |
CPI = EV / AC = 20,000 / 12,000 = 1.66 | CPI = EV / AC = 20,000 / 12,000 = 1.66 | ||
If the ratio has a value higher than 1 then it indicates the project is performing well against the budget. A CPI of 1 means that the project is performing on budget. A CPI of less than 1 means that the project is over budget.<ref>Definition - What Does Cost Performance Index (CPI) Mean? [https://www.designingbuildings.co.uk/wiki/Cost_performance_index_(CPI) DB Wiki]</ref> | If the ratio has a value higher than 1 then it indicates the project is performing well against the budget. A CPI of 1 means that the project is performing on budget. A CPI of less than 1 means that the project is over budget.<ref>Definition - What Does Cost Performance Index (CPI) Mean? [https://www.designingbuildings.co.uk/wiki/Cost_performance_index_(CPI) DB Wiki]</ref> | ||
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| + | == See Also == | ||
| + | *[[Earned Value Management (EVM)]] - A project management technique for measuring project performance; CPI is a key metric in EVM. | ||
| + | *[[Schedule Performance Index (SPI)]] - Another metric used in Earned Value Management, similar to CPI but focuses on-time performance. | ||
| + | *[[Planned Value (PV)]] - The value of the work planned to be completed by a specific time, often used alongside CPI to evaluate project performance. | ||
| + | *[[Actual Cost (AC)]] - The real costs incurred for the work performed on a project up to a specific time, used in the calculation of CPI. | ||
| + | *[[Project Management]] - The discipline of initiating, planning, executing, and closing projects, where CPI is a commonly used performance metric. | ||
| + | *[[Performance Measurement]] - General methods for evaluating effectiveness, efficiency, and quality, of which CPI is a specific instance. | ||
| + | *[[Risk Management]] - The practice of identifying, analyzing, and responding to project risks, is relevant because a low CPI could indicate higher financial risk. | ||
| + | *[[Cost Benefit Analysis]] - A technique for assessing the monetary pros and cons of undertaking a project, related indirectly as CPI can be a factor in such analyses. | ||
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| + | == References == | ||
| + | <references/> | ||
Latest revision as of 14:25, 5 September 2023
The cost performance index (CPI) is a measure of the financial effectiveness and efficiency of a project. It represents the amount of completed work for every unit of cost spent.
As a ratio, it is calculated by dividing the budgeted cost of work completed, or earned value, by the actual cost of the work performed.
For example, if a project has an earned value (EV) of £20,000 but actual costs (AC) were £12,000:
CPI = EV / AC = 20,000 / 12,000 = 1.66
If the ratio has a value higher than 1 then it indicates the project is performing well against the budget. A CPI of 1 means that the project is performing on budget. A CPI of less than 1 means that the project is over budget.[1]
See Also
- Earned Value Management (EVM) - A project management technique for measuring project performance; CPI is a key metric in EVM.
- Schedule Performance Index (SPI) - Another metric used in Earned Value Management, similar to CPI but focuses on-time performance.
- Planned Value (PV) - The value of the work planned to be completed by a specific time, often used alongside CPI to evaluate project performance.
- Actual Cost (AC) - The real costs incurred for the work performed on a project up to a specific time, used in the calculation of CPI.
- Project Management - The discipline of initiating, planning, executing, and closing projects, where CPI is a commonly used performance metric.
- Performance Measurement - General methods for evaluating effectiveness, efficiency, and quality, of which CPI is a specific instance.
- Risk Management - The practice of identifying, analyzing, and responding to project risks, is relevant because a low CPI could indicate higher financial risk.
- Cost Benefit Analysis - A technique for assessing the monetary pros and cons of undertaking a project, related indirectly as CPI can be a factor in such analyses.