CPI (Cost Performance Index)

How it is computed

CPI = EV ÷ AC. With $40k of completed value against $48k of spend, CPI is 0.83 — every dollar spent yields 83 cents of value. Where SPI is schedule efficiency, CPI is money efficiency, and the two move independently: a project can be fast and expensive (SPI 1.1, CPI 0.9) or slow and thrifty (SPI 0.8, CPI 1.05). To see the difference as money, use cost variance: CV = EV − AC, or −$8k in the example.

Why it matters

CPI feeds the estimate at completion (EAC): the canonical formula divides the total budget by CPI, so a CPI of 0.83 translates directly into "at this rate, the project costs about 1.2 times its budget." A widely cited rule of thumb adds weight: cumulative CPI tends to be hard to recover once a project is well underway. Read it as a warning against waving off early CPI erosion with "we will make it up later." The mirror case deserves questions too: a CPI above 1.0 becomes good news only after checking whether the estimate was padded or the EV standard too generous.

Common misconceptions

Reading CPI erosion purely as waste is the misconception. The causes branch: heavy rework, scope creeping in outside change control, or an EV measurement standard that is simply too conservative. Diagnose with SPI alongside: a healthy SPI with a low CPI points at unit cost rather than speed; both low, and it is time to revisit the plan itself.