The Cost Performance Index and Schedule Performance Index are great comparative methods and widely used metrics to analyze the project's progress. The exact details with examples ease understanding of the concept of SPI CPI. 

Schedule Performance Index (SPI)

PMBOK defines the Schedule Performance Index as the ratio of earned value to planned value. It is an indicator of the project's efficiency concerning the schedule or time. The period can be specific or cumulative for a part of a project or an entire project. 

How Is the Schedule Performance Index Calculated?

As it is the ratio, the numerator contains earned value, and the denominator contains the planned value. Earned value is the amount of work expressed according to the authorized budget, and planned value is the budget authorized for scheduled work.

How to Interpret the SPI?

SPI CPI can be interpreted in different ways. The ratio can yield three results, SPI equal to 1, less than one or greater than 1. 

  • SPI equal to 1 indicates the project is on schedule as earned value equals planned value. 
  • SPI less than 1 indicates that the project lags from the schedule due to less earned value than planned value. 
  • SPI greater than 1 indicates the project is leading the time. It happens when the earned value is greater than the planned value.

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The Formula for the Schedule Performance Index (SPI)

Mathematically, the formula is as follows:

SPI = EV/PV, where EV represents an earned value divided by PV representing planned value. The numerator will be the monetary value of planned work, and the denominator will be the monetary value of actual work.

Cost Performance Index (CPI)

The Cost Performance Index, as defined by PMBOK, measures the project's cost efficiency by comparing the work done to expenditure. It is a component of a project's "control cost," providing calculations at any specific time or cumulative project. 

How Is the Cost Performance Index Calculated?

The ratio of the Cost Performance Index contains Earned Value in the numerator and Actual Cost in the denominator. The actual cost is the expenditure done to achieve particular results. 

How Is the CPI Interpreted?

The CPI ratio will have either of the three results: a CPI equal to 1, less than one or greater than 1. 

  • CPI equal to one suggests work done is according to the planned spending. 
  • CPI less than 1 suggests that work done is less than the cost incurred by the company.
  • A CPI greater than 1 suggests that more work has been completed compared to expenditure.

The Formula for the Cost Performance Index (CPI)

Mathematically, CPI is calculated by the formula -

CPI = EV/AC, where EV represents the earned value, and AC represents the Actual Cost. 

Cost Performance Index and Schedule Performance Index Comparison Table

The following table provides the key differences between SPI CPI.

Cost Performance Index (CPI)

Schedule Performance Index (SPI)

Indicator of cost efficiency

Indicator of schedule efficiency

The ratio of Earned Value to Actual Cost

The ratio of Earned Value to Planned Value

It states extra or fewer expenditure

States lag or ahead in time

A ratio less than one indicates excess spending, and greater than one indicates better utilization of money

A ratio of less than one indicates the project is lagging. In contrast, greater than one indicates more work done in the scheduled time.

Cost Performance Index and Schedule Performance Index Comparison Chart

The comparison chart is a graphical representation of the SPI CPI. It is utilized for analysis of the progress of a project. It assists in understanding the ratio individually and relative to each other. The chart further provides room for improvement and thus recommends suggestive measures. 

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Examples and Use of CV, CPI, SV, and SPI

Now that you know SPI CPI refers to the Schedule Performance Index and Cost Performance Index, respectively, you must also understand the use of values. Also, CV represents cumulative variance, and SV represents Schedule Variance. 

Example 1: A Simple Calculation of Cost and SPI (Schedule Performance Indexes)

For the calculation of both the SPI CPI, i.e., Cost Performance Index and Schedule Performance Index (usually taken from reports), the values are as follows:

Situation

Cumulative Planned Value = 250

Cumulative Earned Value = 170

Cumulative Actual Cost = 200

Cost and Schedule Variances

The formula to be used is -

Cost Variance = Earned Value - Actual Cost

Schedule variance = Earned Value - Planned Value

Keeping the values in the formula -

Cost Variance = 170 - 250

Cost Variance = -80

Schedule Variance = 170 - 200

Schedule Variance = -30

The negative values indicate the high actual cost and the planned value. 

Cost and Schedule Performance Indexes

Based on the mentioned values, calculating the SPI CPI: 

Cost Performance Index = 170/200

Cost Performance Index = 0.85

Schedule Performance Index = 170/250

Schedule Performance Index = 0.68

The results indicate the requirement for improvement in work performance according to cost and time. 

Example 2: Case Study of a Project in a Turnaround Situation

This example indicates the project that lagged initially but gained commendable speed after some time. 

Situation

The table with specific data of three months and cumulative data -

Month 1

Month 2

Month 3

Cumulative

Planned Value

90

140

230

460

Earned Value

70

120

240

430

Actual Cost

80

160

230

470

Assuming the total budget is around INR 2300 for one year. 

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Cost and Schedule Variances and Indexes

Calculating cumulative variance and schedule variance based on the formula in Example 1. 

CV = 430 - 470

CV = -40

SV = 430 - 460

SV = -40

The negative values show less work and require improvement. 

Now performing monthly reviews. The chart shows SPI CPI cost variance and schedule variance. 

Variance

Month 1

Month 2

Month 3

Cumulative

Cost Variance

-10

-40

10

-40

Schedule Variance

-20

-20

10

-30

Index

Month 1

Month 2

Month 3

Cumulative

Cost Performance Index

0.88

0.75

1.0

0.91

Schedule Performance Index

0.77

0.85

1.0

0.93

The progression from negative to positive values and ratio to greater than one in month 3 indicates progression, along with the member's hard work and the manager's correct improvement measures. They will provide positive feedback from the senior team. 

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Conclusion

There are several other important concepts that you must be aware of to become a successful project manager. Sign-up for our Post Graduate Program in Project Management to learn the latest tools and techniques followed by PM leaders today. This project management certification course is aligned with PMI-PMP® and IASSC-Lean Six Sigma.

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