SPI & CPI for Project Managers

Written by  Deborah Van Huis
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PlatformsThere are a couple of great tools  to use in tracking and evaluating your construction projects: Schedule Performance Index, SPI and Cost Performance Index, CPI.  SPI measures the success of project management to complete work on time.  It is expressed as the ratio of the budgeted cost of work performed (BCWP) to the budgeted cost of work scheduled (BCWS).  CPI measures relationship between the budgeted cost of work performed (BCWP) and the actual work performed (ACWP) as a ratio.

SPI = BCWP/BCWS

When using the Schedule Performance Index keep in mind that it:

1.  Considers all tasks, not just those on the critical path, so that non-critical tasks are not ignored
2.  Does not take into account if a project's critical path is on schedule
3.  Ignores tasks that have $0 budget such as submittals that require approval or ordering materials
4.  Is used in conjunction with critical path analysis

A project with a SPI greater than 1.0 indicates that the project is ahead of schedule.  If the project SPI is less than 1.0 the project is behind schedule.   An SPI equal to 1.0 indicates that a project is precisely on schedule – a rare occurrence.   The SPI for individual projects and a company's projects as a whole will vary.  Some parts of a project may be ahead of schedule and some will lag behind.

A consistently high value for SPI is not a good thing.  This indicates that either the project schedule or budget was unrealistic.  Check the starting assumptions to ensure that budgets are not unrealistically high and that schedules are not too long.  Similarly a consistently low value for SPI is not desirable.  This too indicates that the original budget and schedule were unrealistically low and that not enough time was allowed to complete the project.  If the SPI is always above or always below the target of 1.0 review scheduling and budgeting procedures to ensure that they are coordinated and realistic.

Use SPI as a trend indicator.   If you manage a lot of similar projects the SPI should approach 1.0 as you become more experienced with them and as you apply lessons learned from previous projects.   Additionally SPI for all projects should be within an established range above and below 1.0.  If the project SPI exceeds the established range, then there is cause for concern and steps to gain control of the schedule and costs should be taken.

SPI is generally used in conjunction with the project's cost performance index, CPI.

CPI = BCWP/ACWP

A project with a CPI greater than 1.0 indicates that actual cost is less than budgeted cost or that the project is under budget.  A CPI less than 1.0 indicates that the project is over budget.

As with SPI, consistently high or low CPI values indicate that the starting assumptions should be reviewed.  Watch the CPI trends to ensure that the values are within the predetermined acceptable range and that projects are being managed effectively.

Lastly, compare the schedule and cost performance indices to each other to determine the Critical Ratio (CR):

CR = SPI x CPI

Charted values for CR should fall randomly on both sides of 1.0.  And just like with the SPI and CPI individually, evaluate trends in CR to ensure that its value stays within the predetermined acceptable range.

The Schedule Performance and Cost Performance Indices are wonderful management tools to help ensure that your projects are on track and stay that way.

Deborah Van Huis

Deborah Van Huis

Deborah Van Huis is Managing Director of the Stella Vista program for high achieving professionals and leaders for Business Women Rising’s Leadership Vistas.  Building from her vast experience and education, she has developed a comprehensive program to challenge those who influence senior level executives to become more effective in their roles as communicators and beyond.  Deborah possesses a rare combination of exceptional technical expertise and considerable skills in teaching and leadership development and thrives on variety and complexity.

Deborah has served as the West Coast Regional Land Manager for KB Home and as the Vice President of Forward Planning for one of the nation’s largest land developers. She has over twenty-five years’ experience in business management, including the planning and execution of many large-scale projects and successfully leading project teams to reach their business goals.  As the West Coast  Regional Land Manager she developed educational and leadership  programs for Centex Homes and continues teaching ongoing classes at UCR Extension, University of Redlands Continuing Studies, where she serves on the Organizational Leadership Certificate Advisory Committee and Westwood College Construction Management Bachelor’s degree program while providing clients with management services in her most recent endeavor:

Expertise On Demand, a business consulting and leadership development firm, which she founded to help clients maximize their profit potential while minimizing costs.

Deborah holds a BS in Civil Engineering from University of Illinois at Chicago and an MS in Administration including a concentration in leadership studies from Central Michigan University.

Website: DVHExpertise.com

comments  

 
0 #3 Engineering&Projects managerOmer Mohamed Mostafa 2013-04-29 13:15
some projects are fast track nature , so in this case the SPI even lower than 1, but still the project is atractive , because of the target set by the stake holders as in the case of the investing in the oil business , thew production is of high importance objective.
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0 #2 RE: SPI & CPI for Project Managersmnewberg 2011-11-16 22:28
Thank you for your comment
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0 #1 RE: SPI & CPI for Project ManagersJim Cotrell 2011-11-16 22:26
This is a great way to look at project tracking. I will be sure to use this in the future.
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