How this instrument works
Earned value management turns three dollar figures tracked against a project schedule into two ratios a manager can read at a glance. Earned value (EV) is the budgeted cost of the work actually finished so far. Actual cost (AC) is what was really spent to finish that work. Planned value (PV) is what the schedule said should have been spent by this point. Dividing EV by AC gives the cost performance index (CPI); dividing EV by PV gives the schedule performance index (SPI).
The two indices answer separate questions, and a project can fail one while passing the other. A CPI under 1.00 means every dollar spent is buying less than a dollar of finished work — a cost overrun, regardless of what the calendar shows. An SPI under 1.00 means less work is complete than the plan called for by this date — a schedule slip, regardless of what the budget shows. Reading total spend alone, without EV, hides which of the two is actually happening.
The method assumes the original budget and schedule baseline were realistic, and that the percent-complete figures feeding EV are honest — a frequent failure is crediting a stalled task as further along than it is, which flatters both ratios. U.S. federal contractors on large cost-reimbursement contracts report CPI and SPI monthly because a certified Earned Value Management System is a contract requirement; a construction superintendent or an engineering lead can use the same two ratios informally on any project with a budget and a schedule.
- Enter Earned value (EV), $ — the budgeted cost of the work actually completed to date, not the amount spent.
- Enter Actual cost (AC), $ — what has really been spent, from invoices or payroll, to get that work done.
- Enter Planned value (PV), $ — what the original schedule budgeted to have been spent by this reporting date.
- Read Cost performance index and Schedule performance index — under 1.00 flags a problem, over 1.00 flags ahead-of-plan.
- Recompute at each reporting period; the trend across several periods matters more than any single reading.
Worked example — a project running over budget and late
Take a project where the budgeted cost of finished work (EV) is $80,000, the actual spend to get there (AC) is $100,000, and the schedule called for $90,000 of value delivered by this point (PV). CPI = 80,000 divided by 100,000 = 0.80: every dollar spent has returned only 80 cents of finished work, a cost overrun of roughly 20 percent against the plan.
SPI = 80,000 divided by 90,000 = 0.8889: the project has delivered about 89 percent of the value the schedule expected by now, so it is also running behind. Because CPI (0.80) sits further from 1.00 than SPI (0.8889), cost is the sharper problem here, not the calendar — a manager checking only the timeline would miss that spending is outpacing progress even faster than the schedule is slipping.
Questions
What do CPI and SPI actually measure?
CPI, the cost performance index, is earned value divided by actual cost — how much finished work a project bought per dollar spent. SPI, the schedule performance index, is earned value divided by planned value — how much of the scheduled work is genuinely done. Both equal 1.00 exactly on plan; below 1.00 signals over budget (CPI) or behind schedule (SPI); above 1.00 signals the opposite.
Why can a project be behind schedule but under budget, or the reverse?
EV is compared against two separate baselines. A project can spend efficiently, with CPI above 1.00, while still trailing the calendar if work is simply proceeding slower than planned rather than more expensively than planned — a crew that is short-staffed but not overspending is a common real case. The two ratios are deliberately independent so one problem cannot mask the other.
Where does earned value (EV) come from if the work isn't finished?
EV is the budgeted, not actual, cost of whatever share of a task is genuinely complete, usually judged against milestones, physical inspection, or units actually produced. It is the figure most vulnerable to bias: crediting a task as 60 percent done when it is really 40 percent inflates EV and makes both CPI and SPI look healthier than the project truly is.
Who tracks CPI and SPI, and how often?
U.S. federal contractors on many cost-reimbursement contracts above set dollar thresholds must report earned value monthly under a compliant Earned Value Management System, per Federal Acquisition Regulation Subpart 34.2. Construction managers, engineering leads and PMO analysts on any budgeted, scheduled project use the same two ratios informally, typically recalculated at each reporting milestone.
Does a CPI or SPI of exactly 1.00 mean the project has no problems?
No — it means spending and progress match the baseline that was set, and that baseline can itself be wrong. An unrealistic budget or an overly generous schedule produces comfortable index numbers for a project still on track to miss its real deadline or cost target. CPI and SPI measure conformance to plan, not the soundness of the plan itself.
Can CPI or SPI forecast the project's final cost?
A common extension divides the remaining budget by the current CPI to estimate a likely final cost, assuming past cost efficiency continues unchanged. That assumption often breaks after a one-time setback or a change in approach, so treat any such projection as a trend signal rather than a guaranteed final figure.
References
- GAO — Cost Estimating and Assessment Guide (earned value management)
- Acquisition.gov — FAR Subpart 34.2, Earned Value Management System
Read this first: This instrument shows arithmetic, not advice. Real offers add fees, taxes and terms that vary by lender and place — verify the figures against your actual paperwork before deciding anything.