The Cost Performance Index (CPI) is a measure of the cost efficiency of a project or task. It is calculated by dividing the earned value (EV) by the actual cost (AC). This ratio provides a quantitative assessment of how well the project team is managing costs relative to the work completed. For example, a CPI of 1.0 indicates that the project is exactly on budget. A CPI greater than 1.0 suggests that the project is under budget, while a CPI less than 1.0 implies that the project is over budget.
This metric is crucial for project control and forecasting. By tracking the CPI over time, project managers can identify trends, assess potential cost overruns, and make informed decisions about resource allocation. Its use dates back to the development of Earned Value Management (EVM) techniques, evolving into a standard tool for evaluating project financial performance across various industries. Improved project financial health, the ability to proactively identify and address budget issues, and enhanced communication among stakeholders are some of its notable advantages.
