Earned value management: SPI and CPI

The correct answer: D. SPI = 0.80 and CPI = 0.89; the project is behind schedule and over budget

✅ Why this answer

• The schedule performance index (SPI) = earned value ÷ planned value = 160,000 ÷ 200,000 = 0.80. Less than 1, meaning behind schedule: only 80% of what was planned so far has been done.
• The cost performance index (CPI) = earned value ÷ actual cost = 160,000 ÷ 180,000 ≈ 0.89. Less than 1, meaning over budget: every dollar spent produced 89 cents of work.

❌ Why the other options are wrong

• (A): flips the division in both indexes (planned ÷ earned, and actual ÷ earned), giving numbers above 1 and the opposite interpretation.
• (B): the schedule index is right, but the cost index is flipped.
• (C): swaps the two indexes.

💡 Key concept

Earned value (EV) is the value of the work actually completed at the budgeted price. It is compared with two things:

• With planned value → the schedule (SPI, and schedule variance SV = EV − PV = −40,000).
• With actual cost → the cost (CPI, and cost variance CV = EV − AC = −20,000).

The rule: above 1 is good, below 1 is bad, and a negative variance is bad.

🔗 Related facts and questions

• The four numbers: PV (the value of what should have been done by today), EV (the value of what has actually been done), AC (what has actually been spent), and BAC (the budget of the whole project at completion).
• A quick reading: SPI below 1 means behind schedule, above 1 means ahead. CPI below 1 means over budget, above 1 means under. For the variances (SV and CV) negative is always bad. And remember that EV is always on top.
• Forecasting to the end of the project: EAC (estimate at completion) = BAC ÷ CPI if performance stays the same. ETC (estimate to complete) = EAC − AC. VAC (variance at completion) = BAC − EAC. Example on this project: if BAC were 400,000, then EAC = 400,000 ÷ 0.89 ≈ 450,000, an expected overrun of about 50,000.
• Practice question: a project has EV = 300,000, PV = 250,000 and AC = 320,000. What is its state? → SPI = 1.20 and CPI ≈ 0.94: ahead of schedule but over budget.
• What earned value does not say: it does not measure quality or user satisfaction. And SPI does not tell an activity on the critical path from a side activity, so the index can look good while the project is late on what matters most.
• The triple constraint: scope, time and cost. Earned value reads time and cost on the assumption that scope is fixed, so if scope changes without control the comparison no longer holds.
• Tracking the project through cost variance: a related question in the full bank.
• A budget overrun caused by scope creep: a related question in the full bank.