The To Complete Performance Index (TCPI) is a relatively new term coined by the PMI to assist project managers in analyzing and forecasting future cost performance of the project.
Since this concept of TCPI is new and there is not much research available on this topic on the Internet, it often confuses many people. However I have passed the exam and now have a better idea on the topic, so I’m writing this blog post to express my understanding on it.
First I will explain this concept to you technically, afterwards I will go for a real world example so that you can visualize it, and then last we will see a mathematical question to hit the last nail in the coffin.
Okay, let’s get started.
As per the PMBOK Guide, Fifth Edition:
“TCPI is the calculated cost performance index that is achieved on the remaining work to meet the specified management goal, such as the BAC or the EAC.”
In other words, the To Complete Performance Index (TCPI) is the estimate of the future cost performance that you may need to complete the project within the approved budget. This budget may be your initial approved budget (BAC), or a new approved budget; i.e. Estimate at Completion (EAC).
You can calculate the TCPI by dividing Remaining Work by the Remaining Funds; i.e.
TCPI = (Remaining Work)/(Remaining Funds)
Remaining work can be calculated by subtracting Earned Value (EV) from the total budget (BAC); i.e. (BAC–EV).
However, there are two cases to determine the Remaining Funds on hand.
Initially, your emphasis will be on completing the work with the initial budget (BAC).
However, if you see that you cannot complete your remaining work with this budget, you will calculate how much more money you will require to complete the project. Once you get this figure, you will ask management to approve the new budget (EAC).
So there are two cases, and the To Complete Performance Index (TCPI) formula will be different for each case.
Let’s see the TCPI formula in both cases.
Case-I: If you’re under budget:
In this case, remaining funds will be calculated by subtracting “Actual Cost (AC) incurred to date” from the “initial budget”; i.e. (BAC–AC).
Here, the TCPI formula will be:
TCPI = (BAC–EV)/(BAC–AC)
Case-II: If you’re over budget:
You will update the cost baseline, and raise the change request and get it approved. In this case, remaining funds will be calculated by subtracting Actual Cost (AC) incurred to date from this new approved budget (EAC); i.e. (EAC–AC).
Here, the TCPI will you show the required cost performance to complete the project with the new approved budget.
TCPI = (BAC–EV)/(EAC–AC)
Keep in mind that if you have calculated the EAC using Earned Value Management formula (EAC=BAC/CPI), the TCPI will be equal to the CPI at the moment when you calculate the TCPI the first time.
This is because while calculating EAC you have already assumed that the future cost performance of the project will be the same as the past cost performance of the project.
Here is where the technical details of the To Complete Performance Index (TCPI) completes, now let’s see it in a real world example.
Suppose you have taken a contract to paint 10,000 square feet of area in 10 days. This means you have to paint 1,000 square feet of area per day to complete the project on time.
However, when you review your progress after 5 days, you find that only 3,000 square feet of area is painted.
Now you have 5 days left and 7,000 square feet of area is yet to be painted. You calculate and deduce that if you want to complete your task within 10 days, you will have to paint 1,400 square feet of area per day.
This will be your future performance to complete the task on time, and this future performance is known as the To Complete Performance Index (TCPI).
Please note that Cost Performance Index (CPI) is your past performance and TCPI is your future performance which you must meet to complete the project within the approved budget.
You may also consider what will happen if you perform better; i.e. you painted 7,000 square feet of area in 5 days.
In this case, you can paint 600 square feet of area per day to complete the task. In other words, you are comfortable to complete the task.
(The above example may not be a technically perfect example for the TCPI; however, I believe that it will help you understand the concept easily.)
A mathematical example of TCPI
You have a project to be completed in 12 months and the total cost of the project is $100,000 USD. Six months have passed and $60,000 USD has been spent, but on closer examination you find that only 40% of the work is completed so far.
Find the To Complete Performance Index (TCPI) for this project.
Given in question:
Budget at Completion (BAC) = $100,000 USD
Actual Cost (AC) = $60,000 USD
Planned Value (PV) = 50% of $100,000
= $50,000 USD
Earned Value (EV) = 40% of $100,000
= $40,000 USD
Cost Performance Index (CPI) = EV / AC
= $40,000 / $60,000
Cost Performance Index (CPI) = 0.67
Estimate at Completion (EAC) = BAC/CPI
= $149,253.73 USD
Estimate at Completion (EAC) = $149,253.73 USD
From the calculation, we can see that since the CPI is less than one, you’re over budget. Therefore, to calculate the To Complete Performance Index (TCPI), you will use the formula based on EAC.
TCPI = (BAC–EV)/(EAC–AC)
TCPI = 0.67
This means that you can continue with a Cost Performance Index of 0.67 to complete the project.
Before I conclude this blog post, let’s revise some key points regarding the To Complete Performance Index (TCPI):
- Cost Performance Index (CPI) is the past performance of the project; on the other hand TCPI is the future performance of the project.
- If you are under budget, you will calculate the TCPI based on the BAC.
- If you are over budget, you will calculate the TCPI based on the EAC.
- If the To Complete Performance Index in less than one, you are in a comfortable position.
- If the To Complete Performance Index is greater than one, you have to perform with better cost performance than the past cost performance.
- And finally, if the To Complete Performance Index is equal to one, you can continue with the same cost performance.
Here I’m completing this series of seven articles on Earned Value Analysis, Forecasting and To-Complete Performance Index.
I tried my best to make these concepts and calculations easy for you; however, if you still have some doubt, you can contact me through the comment section.
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