Analyzing Your Construction Organization’s Project Progress Using the Schedule Performance Index and Cost Performance Index

Published: Oct 9, 2024
By: Craig Mann
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Job costing and budgeting are critical to the profitability and success of all construction projects. The cost performance index (CPI) and schedule performance index (SPI) are useful tools to help assess a project's efficiency, cost, and schedule performance so your organization can better track, manage, and control the execution of your construction projects.

What Is the Schedule Performance Index?

The schedule performance index measures a project’s progress and whether it’s ahead of or behind schedule. The SPI is calculated by dividing a project’s earned value (the amount of work completed) by the planned value (the budgeted cost of work scheduled). Below are two examples illustrating this calculation:

Example 1 \| Schedule Performance Index = Earned Value / Planned Value
Project Value	SPI		EV-PV %	Value
Budget				$450,000
Earned Value (EV): % of work completed * budget			40%	$180,000
Planned Value (PV): % planned completion * budget			50%	$225,000
Actual Cost (AC): Funds spent up to the measured point				$225,000
	SPI < 1 =	EV	Divided By	PV
Less than one signifies that the project is behind schedule	0.8	$180,000		$225,000

Example 2 \| Schedule Performance Index = Earned Value / Planned Value
Project Value	SPI		EV-PV %	Value
Budget				$450,000
Earned Value (EV): % of work completed * budget			40%	$180,000
Planned Value (PV) % planned completion * budget			20%	$90,000
Actual Cost (AC): Funds spent up to the measured point				$225,000
	SPI > 1 =	EV	Divided By	PV
Greater than one signifies that the project is ahead of schedule	2	$180,000		$90,000

If the SPI is more than one, the project is ahead of schedule. If the SPI is less than one, the project is behind schedule. Investigate to determine the root cause for the negative SPI, so you can effectively plan for and mitigate any potential delays in reaching project commitments.

What Is the Cost Performance Index?

The cost performance index measures the financial performance of a project and whether it’s on budget. The CPI is equal to the budgeted cost of work performed divided by the actual cost of work performed. Below are two examples illustrating this calculation:

Example 1 \| Cost Performance Index = Earned Value / Actual Cost
Project Value	CPI		EV-PV %	Value
Budget				$450,000
Earned Value (EV): % of work completed * budget			40%	$180,000
Planned Value (PV): % planned completion * budget			50%	$225,000
Actual Cost (AC): Funds spent up to the measured point				$200,000
	CPI < 1 =	EV	Divided By	AC
Less than one signifies that the project is over the budget of planned resources at the time of the measurement	.90	$180,000		$200,000

Example 2 \| Cost Performance Index = Earned Value / Actual Cost
Project Value	CPI		EV-PV %	Value
Budget				$450,000
Earned Value (EV) %of the work completed * budget			40%	$180,000
Planned Value (PV) % planned completion * the budget			20%	$90,000
Actual Cost (AC) money spent up to the measured point				$160,000
	CPI > 1 =	EV	Divided By	AC
Greater than one signifies that the project is within the budget of planned resources at the time of the measurement	1.125	$180,000		$160,000

If the CPI is greater than one, the project is within budget; if the CPI is less than one, the project is over budget. Construction organizations should regularly compare the CPI estimates to identify potential schedule variances and cost overruns.

Ideal Target Levels for the Cost and Schedule Performance Indexes

The target values of the cost and schedule performance indexes should be within one standard deviation from the expected values for both indices. If either index is above or below one standard deviation from the expected projections, investigate any potential errors in the calculation, data used, or substantial project risks.

Using the CPI and SPI for Assessing Project Performance

While the CPI and SPI are valuable for assessing overall project performance, they don’t pinpoint specific areas for improvement or identify trouble spots. Regularly reviewing the CPI, SPI, and other financial statement ratios can help you recognize problems and identify weaknesses, so you can adjust scheduling and budgets accordingly and gain deeper insights into your project’s financial health.

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Craig Mann

Craig Mann is a Senior Manager in the Forensic, Litigation & Valuation Group with extensive experience in construction progress billing and accounting for large-scale projects.

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