View source for Cost Performance Index (CPI)

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.<ref>Definition - What Does Cost Performance Index (CPI) Mean? [https://www.designingbuildings.co.uk/wiki/Cost_performance_index_(CPI) DB Wiki]</ref>


== 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.


== References ==
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