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 a 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.
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