What is Cost Performance Index?
The cost performance index (CPI) is an earned value management ratio that measures the cost efficiency of work performed on a project. It is calculated as earned value divided by actual cost.
How It Works
- Compute earned value (EV) — the budgeted cost of work completed.
- Capture actual cost (AC) — the real spend on completed work.
- Divide EV by AC to get the CPI.
- A CPI above 1 indicates the project is under budget, below 1 means over budget.
- Forecast the estimate at completion using the CPI to project total final cost.
Saudi Context
Large Saudi public-sector and Vision 2030 megaprojects supervised by the Ministry of Finance and PMO follow earned value management standards. Contractors report CPI and schedule performance index figures in monthly progress reviews submitted to clients.
Example
A contractor completes work worth SAR 4,000,000 in earned value at an actual cost of SAR 4,400,000. CPI = 4,000,000 ÷ 4,400,000 = 0.91, indicating 9% cost overrun on completed work.