How to compute SPI and CPI from pay application data, with a $12 million example

Every month a project manager marks percent complete on each line of the schedule of values, and the owner pays against it. Multiply that percent by the cost budget for the same line and the result is earned value, the budgeted cost of the work in place. Earned value divided by planned value from the baseline schedule is the schedule performance index (SPI). Set against actual cost from the job cost ledger, the same earned value gives the cost performance index (CPI).

Both indexes read the same way, and WarU calls any value above 1.0 favorable. WarU puts a CPI of 0.95 in dollar terms: each dollar spent bought 95 cents of work.

The Department of Energy's Office of Project Management sets a warning line in its January 2020 EVMS and Project Analysis Standard Operating Procedure. DOE analysts treat a cumulative SPI or CPI below 0.95 as an early warning to investigate.

1. Earned value. AIA's instructions for the G703 Continuation Sheet compute percent complete as column G, total completed and stored to date, divided by column C, the scheduled value. For earned value, add only columns D and E, work completed in prior periods and this period, and leave out column F, materials stored on site but not yet installed. Multiply that percent by the line's cost budget.
2. Planned value. Spread each line's cost budget across the months of the baseline schedule. A cost-loaded schedule gives this directly. Without one, convert the billing forecast prepared at the start of the job from contract dollars to cost dollars.
3. Actual cost. Pull cost to date for each line from the accounting system, with cost codes mapped to the schedule of values.

Using the cost budget keeps all three inputs in cost dollars. That matters when markup sits unevenly across lines, as it does on a front-loaded schedule of values.

AIA notes that change orders are usually listed separately, on their own G703 or at the end of the schedule. Give each approved change order its own line and its own cost budget, and add it to the budget at completion (BAC), the total cost budget for the job.

The line detail shows where the totals come from. Structural steel sits 20 points behind plan with a CPI of 1.03, so the crew is slow but under budget. Concrete stands at 95% against a plan of 100% and carries the worst CPI on the job, 0.90, with $1.89 million spent against $1.71 million earned. Enclosure has the lowest SPI, 0.67.

WarU points out that SPI is independent of the critical path. Whether the slow steel moves the finish date is a question for the critical path schedule.

The CPI method puts the final cost at about $11.44 million, which cuts gross margin from $1.2 million to about $563,000. The composite method also folds in the schedule lag and lands at about $12.31 million, above the contract value. DOE's procedure says these formulas are most accurate between 15% and 95% complete, and the example job is 46% complete by earned value.

Set both figures next to the project manager's own cost-to-complete on the WIP schedule. When the PM's forecast sits below the CPI floor, the job is a candidate for margin fade at a later review.

In the example, the $4.92 million earned falls between planned value at month five ($4.05 million) and month six ($5.61 million). Earned schedule is 5 + (4.92 - 4.05) / (5.61 - 4.05), or 5.56 months. The time-based index, SPI(t), is 5.56 divided by the 6 months elapsed, or 0.93. DOE forecasts duration as the baseline duration divided by SPI(t), which gives about 13 months against the planned 12.