What does the Cost Performance Index (CPI) measure?

The Cost Performance Index (CPI) is a critical measure used in project management to assess how efficiently resources are being utilized in terms of cost. It is calculated by dividing the earned value (EV) of the project by the actual cost (AC). This ratio indicates how much value is being gained for each dollar spent on the project.

When a CPI value is greater than one, it signifies that the project is performing well in terms of cost efficiency; it means that the cost of work performed is less than what was planned. Conversely, a CPI value less than one indicates that the project is over budget, reflecting inefficiencies in cost management. Thus, the CPI directly measures the cost efficiency of budgeted resources, providing insight into the financial health of a project and enabling managers to make informed decisions regarding future actions.

Understanding CPI is essential for maintaining control over project costs and ensuring that resources are used effectively throughout the project lifecycle. This focus on cost efficiency distinguishes it from the other options available, which may address different aspects of project performance rather than specifically evaluating cost efficiency in relation to the budgeted resources.