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This blog post is the fourth blog post in a series of seven on earned value management and project forecasting.
If you’re coming here from a search engine or a referral, please read through my previous three blog posts before reading this post, there is relevant background material.
Here are the links for these blog posts:
Schedule Performance Index (SPI) and Cost Performance Index (CPI), like variances, allow you to assess the health of a project.
In specific, SPI and CPI help you analyze the efficiency of schedule performance and cost performance of any project.
Schedule Performance Index (SPI)
The Schedule Performance Index indicates how efficiently you are actually progressing compared to the planned project schedule.
As per the PMBOK Guide, “The Schedule Performance Index (SPI) is a measure of schedule efficiency, expressed as the ratio of earned value to planned value.”
The Schedule Performance Index gives you information about the schedule performance of the project. It is the efficiency of the time utilized on the project.
Formula for the Schedule Performance Index (SPI)
The Schedule Performance Index can be determined by dividing earned value by planned value.
Schedule Performance Index = (Earned Value) / (Planned Value)
SPI = EV / PV
With the above formula, you can conclude that:
If the SPI is greater than one, this means more work has been completed than the planned work. In other words, you are ahead of schedule.
If the SPI is less than one, this means less work has been completed than the planned work. In other words, you are behind schedule.
If the SPI is equal to one, this means work is being completed at about the same rate as planned, you are on time.
While calculating the Schedule Performance Index, make sure that you consider all tasks. Sometimes you may only consider the tasks on the critical path while ignoring the rest, this will cause an erroneous result.
Therefore, ensure that non-critical activities are included.
Example of the Schedule Performance Index (SPI)
You have a project to be completed in 12 months and the budget of the project is 100,000 USD. Six months have passed and 60,000 USD has been spent, but on closer review, you find that only 40% of the work has been completed so far.
Find the Schedule Performance Index and deduce whether the project is behind or ahead of schedule.
Given in the question:
Actual Cost (AC) = 60,000 USD
Planned Value (PV) = 50% of 100,000 USD
=50,000 USD
Earned Value (EV) = 40% of 100,000 USD
= 40,000 USD
Now,
Schedule Performance Index (SPI) = EV / PV
= 40,000 / 50,000
= 0.8
Hence, the Schedule Performance Index is 0.8
Since the Schedule Performance Index is less than one, you are behind schedule.
Cost Performance Index (CPI)
The Cost Performance Index helps you analyze the efficiency of the cost utilized by the project. It measures the value of the work completed compared to the actual cost spent on the project.
As per the PMBOK Guide, “The Cost Performance Index (CPI) is a measure of the cost efficiency of budgeted resources, expressed as a ratio of earned value to actual cost.”
The Cost Performance Index specifies how much you are earning for each dollar spent on the project. The Cost Performance Index is an indication of how well the project is remaining on budget.
Formula for the Cost Performance Index (CPI)
The Cost Performance Index can be determined by dividing earned value by actual cost.
Cost Performance Index = (Earned Value) / (Actual Cost)
CPI = EV / AC
With the above formula, you can conclude that:
If the CPI is less than one, you are earning less than the amount spent. In other words, you’re over budget.
If the CPI is greater than one, you are earning more than the amount spent. In other words, you are under budget.
If the CPI is equal to one, this means earning and spending are equal. You can say that you are proceeding exactly as per the planned budget spending, although this rarely happens.
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