What are the advantages and disadvantages of using cost performance index (CPI) in EVM?

1 Benefits of CPI

CPI can provide valuable insights into the efficiency and profitability of a project, as well as the potential impact of cost variances on the project outcome. Project managers can use CPI to monitor and control the project budget, evaluate the performance of the project team, contractors, and suppliers, forecast the estimate at completion (EAC) and estimate to complete (ETC), and communicate the project status and progress to stakeholders and sponsors. This can help them identify any deviations from the baseline plan, identify areas for improvement or corrective action, and justify any changes or adjustments in scope, schedule, or resources.

2 Drawbacks of CPI

CPI is not a perfect metric and has some limitations and challenges that project managers should be aware of. For example, CPI does not take into account the impact of schedule delays or accelerations on the project cost, which should be accounted for by using the schedule performance index (SPI). CPI can also be inaccurate if the earned value is not measured or reported correctly, or if the actual cost does not include all relevant expenses. Furthermore, CPI can vary depending on the level of detail and granularity of the data used to calculate it. To ensure accuracy, project managers should use a consistent and appropriate level of detail for the work breakdown structure (WBS), the cost accounts, and the reporting periods.

3 How to use CPI effectively

CPI is a useful and powerful metric, but it should not be used in isolation or without context. Project managers should use CPI in conjunction with other EVM metrics, such as SPI, variance at completion (VAC), and to complete performance index (TCPI), to get a comprehensive and balanced view of the project performance. They should also establish a realistic and reliable baseline plan for the project scope, schedule, and budget and track and report the earned value, actual cost, and planned value of the project regularly and consistently. Furthermore, they should analyze and interpret the CPI results and trends, comparing them with the project objectives, expectations, and benchmarks. Lastly, corrective or preventive actions should be taken to address any issues or risks that affect the project cost performance, with any changes or impacts documented and communicated to the project plan or outcome.

4 Here’s what else to consider

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