Welcome to Project Management Questions!

You can ask any question on Project Management and you can rest assured that real Project Managers will answer your shortly!

What does the cost performance index tell us?

0
votes
What does the cost performance index (or CPI) tell us regarding the status of the project?
asked 10 years ago by anonymous

1 Answer

0
votes
CPI tells is the project cost in under control or not. CPI is calculated using the following formula
CPI = Earned value / Actual cost
IF CPI = 1 means the project cost is as per the plan
If CPI > 1 means the completed more work than planned
If CPI < 1 means the completed less work than per plan

if the CPI deviation from 1 more mean, planning is not proper.
answered 10 years ago by kolls99 (220 points)
Taking CPI a few steps further.
EAC (Estimate at Complete) = BAC (your current approved budget)/CPI
e.g. EAC = BAC/CPI
EAC will be your forecast-ed final cost and this you will have to explain to senior management and your key stakeholders. Senior management will then either approve the EAC (now your BAC) and you can continue or if they do not approve the EAC then either scope must be eliminated until you can get the cost down to the BAC or the project should be killed.

I'd also be very concerned about the SPI where
SPI = Earned Value / Planned Value
SPI < 1 means that you are behind schedule
SPI > 1 means that you are ahead of schedule
You can forecast the length of your project
EAC(duration) = BAC(current approved duration)/SPI

Normally a CPI or SPI within 10% (plus or minus) is considered acceptable (assuming your key stakeholders agree) and it might be possible to regain control if the values are less than one. If the values are greater than + or - 10% then you have a major concern and a red flag on your project.
10 years ago by jgt1942 (220 points)

Related questions

+1
vote
2
answers
+1
vote
1
answer
0
votes
1
answer
0
votes
2
answers
asked 9 years ago by anonymous
© 2010 - 2012 Project Management Questions - All Rights Reserved