Glossary
Cost Performance Index (CPI)
CPI, Cost Efficiency Index
The cost performance index (CPI) shows how much planned project value you get for every dollar or euro spent. The formula is CPI = EV / AC: earned value divided by actual cost. A CPI below 1 means a cost overrun; a CPI above 1 means the completed work cost less than planned.
The CPI is a key figure of earned value analysis. It answers a question that a simple comparison of planned and actual cost leaves open: did the team deliver the planned work for the money spent?
How do you calculate the cost performance index?
CPI = EV / AC
- EV (earned value): the value of the work completed so far, measured at planned cost. Calculation: percent complete × total budget (budget at completion, BAC).
- AC (actual cost): what the completed work actually cost.
Both values refer to the same cutoff date, the status date.
Example: calculating the CPI
Example: a team builds a customer portal with a budget (BAC) of 20,000 EUR. On the status date the portal is 40% complete and actual costs are 10,000 EUR.
| Value | Calculation | Result |
|---|---|---|
| Budget (BAC) | 20,000 EUR | |
| Earned value (EV) | 40% × 20,000 EUR | 8,000 EUR |
| Actual cost (AC) | 10,000 EUR | |
| CPI | 8,000 / 10,000 | 0.8 |
| Cost variance (CV) | EV − AC = 8,000 − 10,000 | −2,000 EUR |
A CPI of 0.8 means: for every euro spent, the team completed work with a planned value of 80 cents. If efficiency stays the same, the project will cost BAC / CPI = 20,000 / 0.8 = 25,000 EUR, 5,000 EUR more than planned. This forecast is called the estimate at completion (EAC).
How do you interpret the CPI?
| CPI | Meaning | Example |
|---|---|---|
| greater than 1 | Under budget: the work costs less than planned | CPI 1.25: 1.25 EUR of planned value per euro spent |
| equal to 1 | Exactly on budget | CPI 1.0: earned value and actual cost match |
| less than 1 | Over budget: the work costs more than planned | CPI 0.8: the completed work costs 25% more than planned |
The CPI says nothing about the schedule. A project with a CPI of 1.1 can still be weeks behind. The schedule performance index (SPI = EV / PV) covers the timeline. Read both values together:
- CPI ≥ 1 and SPI ≥ 1: cheaper and faster than planned.
- CPI < 1 and SPI ≥ 1: on schedule but too expensive, for example because extra staff bought the time.
- CPI ≥ 1 and SPI < 1: economical but too slow.
- CPI < 1 and SPI < 1: too expensive and too late. The project needs a decision on scope, budget, or deadline.
Common mistakes with the CPI
- Misreading the inverse: A CPI of 0.8 does not mean 20% extra cost. Actual cost is 1 / 0.8 = 125% of earned value, so 25% higher.
- Planned value instead of earned value: Dividing planned value (PV) by actual cost measures spending rate, not efficiency.
- Inflated progress: EV depends on percent complete. If a team reports 90% too early, the CPI looks better than it is.
- Forecasting too early: In the first weeks the CPI fluctuates because little work is complete. Project final costs once a substantial share of the work is done.
Where does Merlin Project show the CPI?
Merlin Project calculates the Cost Performance Index (CPI) automatically once costs and actual values are maintained, as BCWP / ACWP. BCWP (budgeted cost of work performed) is the earned value, ACWP (actual cost of work performed) the actual cost.
The ready-made view View › Work Breakdown › Earned Value shows all earned value key figures as a table and time phase chart. Add the CPI and other earned value fields to any activity, assignment, or resource view with Insert › Column. All earned value fields refer to the status date; check it in the Project Settings before you evaluate the CPI.
To set up budget and costs so the numbers add up, read Effectively Manage Budget and Costs.
