Definition:
A measure of cost efficiency in completing project work.
CPI = EV / AC
Key Components:
- Cost Efficiency Indicator: Values above 1 indicate cost savings, below 1 indicate overruns.
- Budget Monitoring: Tracks financial performance.
- Cost Forecasting: Helps predict final project costs.
Use Cases/Industries:
- Construction: Monitoring spending efficiency on materials.
- Energy Sector: Evaluating cost-effectiveness of equipment installation.
- IT Projects: Assessing cost control in software development.
Advantages:
- Helps prevent cost overruns.
- Provides an early warning for financial risks.
- Supports strategic cost management.
Challenges:
- Can be skewed by inaccurate cost tracking.
- Doesn’t account for work quality.
Related Terms:
Schedule Performance Index, Estimate to Complete, Earned Value
Example:
A CPI of 0.9 means the project is running over budget.
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Synonyms:
Cost Efficiency Ratio, Budget Performance Index, Expenditure Control Measure
