Cost performance index (CPI) is calculated by dividing the earned value of the work completed by the actual cost of doing it: CPI = EV / AC. A result above 1 means the work has cost less than it earned (under budget); below 1 means it has cost more. Getting trustworthy EV and AC figures every day is what an integrated software can support.
How to Calculate Cost Performance Index
The cost performance index formula divides earned value (EV) by actual cost (AC):
CPI = EV ÷ AC
For example, if work with an earned value of $500,000 cost $550,000 to complete, CPI = 500,000 ÷ 550,000 = 0.91. You are getting about 91 cents of value for every dollar spent, so the project is running over budget. Here’s how to read the result:
| CPI value | What it means |
| Greater than 1 | Under budget: the work completed has cost less than its earned value |
| Equal to 1 | On budget: cost matches the value of the work completed |
| Less than 1 | Over budget: the work completed has cost more than its earned value |
Why Accurate Cost Performance Index Tracking Matters
“Cost overrun” is a dreaded occurrence for any construction project. Yet many builds end up exceeding their estimated budgets with implications going far beyond just project costs. They can impact a construction company’s profit on a project, their current business plus future opportunities.
Project performance metrics can serve as a point-in-time indicator of the financial efficiency of projects from beginning to end. One such metric, cost performance index (CPI), is a reliable measure of the budgeted value of completed work compared to actual costs. Need to know how far above or below budget you are at a certain point in the project, or even if you’re on target? The CPI will tell you.
Cost performance index (aka, cost performance indicator) is calculated using a simple formula that relies on your project’s actual costs (AC) and the earned value (EV) determined from the estimate at the project’s start. Sure, it can be done manually or within a Microsoft Excel® spreadsheet — as it has been for decades. But you may have encountered some of the inherent limitations involving miscalculations, keystroke errors and broken spreadsheet cell formulas. Plus, if you’re working on large capital projects, someone will be doing a lot of math, which adds to the risk factors.
The inevitable outcome of those risks? Distorted CPI results that shouldn’t be used for decision-making or for gauging your project’s cost efficiency. And, of course, cost overruns.
A worthy alternative is construction software. While there’s no software option dedicated solely to calculating a cost performance index, several available features currently stand out to help you make the most of this metric.
Cost Performance Index Software Features to Look For
Performance Analytics Beyond CPI
You need data to make decisions. The CPI metric is one such piece of that data, but it’s only part of the story of your project. When presented with other metrics — like schedule performance index (SPI) or EV — you can evaluate project status and progress on work done to that point from other angles. This access to a full range of performance analytics allows you to see where things are running smoothly and where the risks and issues are.
Automated Reporting and CPI Alerts
Those performance metrics, and other project-related data involving productivity and risk, may not make much sense on their own. But regular reports can give context around these pieces of data, summarizing them into digestible insights. That can make monitoring a build’s financial efficiency a more manageable process, especially for projects in the infrastructure, capital and commercial categories that generate endless amounts of data.
Reports typically present project information — reflecting the degree of detail you specify — in written and visual forms and can serve as a collaborative tool when cost deviations require collective decision-making among stakeholders.
Some software may also let you set parameters so that when the cost performance index falls below a certain level or suddenly fluctuates, it triggers the creation of a report and tags the appropriate team members. It allows them to analyze the data together and make any course corrections.
Real-Time Cost Performance Dashboards
Maybe you want to find out where things stand financially without having to wait for a report. Or you don’t have enough time to sift through the latest one. Or recent events have affected your project and you need to know now what the budget impact is.
Dashboards present the information you need in a user-friendly interface, giving you an at-a-glance view into your project’s cost (and schedule) performance progress in real time, all laid out in a visual format. You might consider them a more up-to-the-minute, hyper-focused, mini version of a report. One other advantage of dashboards is that they can give you a heads-up on potential problems (supported by what your cost performance index and other metrics reflect). Helping you avoid what otherwise could turn into costly surprises makes them an effective risk-management tool.
A Single Source of Truth for Cost Data
All that data that feeds into the CPI you rely on isn’t going to do much good or deliver the precision you depend on if the data is strewn across a disconnected network of point solutions or individual computers in data silos. But aggregating those cost details (plus your other related performance metrics) into one repository within your construction software solves this inefficiency.
This means the numbers pulled into the CPI computations for your reports and dashboards are from one reliable source, populated with the most current, accurate data. Imagine having the confidence in understanding your project’s cost performance to date, and make the data-driven decisions that drive your project forward — and remain profitable.
How InEight Helps You Track Cost Performance Index
InEight Report features the analytics, reporting and dashboard capabilities you need — with all your data in one place — to help keep you on top of cost trends and issues no matter how large or complex your capital projects are.
InEight Control includes built-in earned value management capabilities, using live earned value metrics such as CPI to help prevent cost overruns and schedule delays.
