Cost Performance Index (CPI)

The Cost Performance Index (CPI) is the ratio of the budgeted cost of work performed (Earned Value) to the actual cost of performing that work (Actual Cost). A CPI of 1.0 means every pound spent has delivered exactly one pound of budgeted work — perfect efficiency. A CPI below 1.0 means you are spending more than the work justifies — for every £1.00 spent, you are only earning £0.90 of budgeted work, for example. A CPI above 1.0 means you are completing work more efficiently than budgeted. Like SPI, CPI is a ratio that makes cross-programme comparison straightforward.

CPI is one of the most powerful early warning indicators in project controls. Research by the US Government Accountability Office and others consistently shows that CPI at the 20% completion point rarely improves significantly over the remainder of the project. If a project is running at CPI 0.85 when 20% of the work is done, it is very likely to finish at or worse than CPI 0.85. This makes early CPI readings highly predictive of final cost outcomes, which is why funders and sponsors place so much weight on it. The Estimate at Completion calculated using current CPI — EAC = BAC ÷ CPI — is often the most reliable forecast available.

CPI is sensitive to the accuracy of earned value measurement. If EV is overstated — because progress is being claimed generously — CPI will look better than it is. If accruals lag invoices, AC may understate true spend in the short term, making CPI look artificially healthy. The most resilient way to use CPI is to track it as a trend over multiple periods rather than relying on any single period reading. A CPI that has been declining steadily from 1.05 to 0.92 over six months is a more actionable signal than a single period reading of 0.96, which could reflect timing noise rather than a genuine trend.