Performance and percent indexes in earned value management (EVM) provide valuable insights into a project’s efficiency and progress. Two key indexes are the Cost Performance Index (CPI) and Schedule Performance Index (SPI). Here’s how to calculate and interpret these indexes:
- Cost Performance Index (CPI):
- Formula: CPI = Earned Value (EV) / Actual Cost (AC)
- Interpretation:
- CPI value greater than 1 (CPI > 1) indicates that the project is performing efficiently, as the value of work completed (EV) is higher than the actual cost incurred (AC). Each unit of cost spent is generating more value.
- CPI value less than 1 (CPI < 1) suggests that the project is not performing efficiently, as the actual cost (AC) exceeds the value of work completed (EV). Each unit of cost spent is generating less value than planned.
- Schedule Performance Index (SPI):
- Formula: SPI = Earned Value (EV) / Planned Value (PV)
- Interpretation:
- SPI value greater than 1 (SPI > 1) indicates that the project is ahead of schedule, as the value of work completed (EV) is higher than the planned value (PV) at this point.
- SPI value less than 1 (SPI < 1) indicates that the project is behind schedule, as the value of work completed (EV) is less than the planned value (PV) at this point.
Interpreting these indexes involves understanding the project’s efficiency and progress:
- CPI Interpretation:
- CPI = 1: Indicates the project is exactly on budget.
- CPI > 1: Indicates cost efficiency; the project is delivering more value for the cost incurred.
- CPI < 1: Indicates cost overrun; the project is delivering less value than expected for the cost incurred.
- SPI Interpretation:
- SPI = 1: Indicates the project is exactly on schedule.
- SPI > 1: Indicates ahead-of-schedule performance; the project is progressing faster than planned.
- SPI < 1: Indicates behind-schedule performance; the project is progressing slower than planned.
These indexes provide quantitative measures of a project’s performance in terms of cost efficiency (CPI) and schedule adherence (SPI). They help IT project managers assess project health, make informed decisions, and take corrective actions to ensure the project stays on track within budget and schedule constraints.
