To Complete Performance Index TCPI in Project Cost Management

The To Complete Performance Index (TCPI) is the third forecasting tool mentioned in the PMBOK Guide.

TCPI is a relatively new term. This excellent tool helps project managers in calculating the future cost performance of the project. Since the TCPI is a new term and not much research is available, it often confuses professionals.

So, I am writing a blog post on this topic.

First, I will explain the definition, and then I will show a real-world example. Finally, I will give mathematical examples using different cases.

I hope that after reading this blog post, you will have a better understanding of the To Complete Performance Index.

To Complete Performance Index (TCPI)

The To Complete Performance Index (TCPI) gives you the future Cost Performance Index. You have to follow it for the remaining work to complete the project within the budget.

According to the PMBOK Guide:

“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.”

The To Complete Performance Index 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 newly calculated one (Estimate at Completion).

You can calculate the TCPI by dividing the remaining work by the remaining funds.

TCPI = (Remaining Work) / (Remaining Funds)

You can calculate the remaining work by subtracting the Earned Value from the total budget.

Remaining Work = Total budget – Earned Value

= (BAC – EV).

You can find the remaining funds in two cases; when you are under budget and when you are over budget.

The To Complete Performance Index formula will be different in both cases.

Let’s discuss these two cases.

Case I: You’re Under Budget

Here, you will calculate the remaining funds by subtracting the “actual cost incurred to date” from the “initial budget”.

The remaining funds = Budget at Completion – Actual Cost

= BAC – AC

The TCPI formula will be:

TCPI = (BAC – EV) / (BAC – AC)

Example of TCPI: Case I

You are working on a project to be completed in 24 months. The BAC of the project is 200,000 USD. 12 months have passed, you have spent 110,000 USD, and 60% of the work has been completed.

Find the To Complete Performance Index (TCPI) for this project.

Given in the question:

Budget at Completion (BAC) = 200,000 USD

Actual Cost (AC) =110,000 USD

Planned Value (PV) = 50% of 200,000

= 100,000 USD

Earned Value (EV) = 60% of 200,000

= 120,000 USD

Cost Performance Index (CPI) = EV / AC

= 120,000 / 110,000

= 1.1

Since the Cost Performance Index is 1.1, which is greater than one, you are under budget. Therefore, you will use the TCPI formula based on the BAC in this case.

TCPI = (BAC – EV) / (BAC – AC)

= (200,000 – 120,000) / (200,000 – 110,000)

= 80,000 / 90,000

= 0.89

This means that you can continue with a Cost Performance Index of 0.89 to complete the project.

Case II: You’re Over Budget

Here, the remaining funds will be calculated by subtracting the actual cost incurred to date from the Estimate at Completion.

The remaining funds = Estimate at Completion – Actual Cost

= EAC – AC

Here, the TCPI will show you the required cost-performance to complete the project with the newly calculated budget.

TCPI= (BAC – EV) / (EAC – AC)

Example of TCPI: Case-II

You have a project to be completed in 12 months. The budget of the project is 100,000 USD. 6 months have passed, and you have spent 60,000 USD, but on closer examination, you find that only 40% of the work has been completed so far.

Find the To Complete Performance Index (TCPI) for this project.

Given in the 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

= 0.67

Hence, the Cost Performance Index (CPI) = 0.67

Since the Cost Performance Index is less than one, you are over budget. Now you will calculate the new Estimate at Completion and use a formula based on the EAC.

Estimate at Completion (EAC) = BAC / CPI

= 100,000 / 0.67

= 149,253.73 USD

Hence, Estimate at Completion (EAC) = 149,253.73 USD

Now, TCPI = (BAC – EV) / (EAC – AC)

= (100,000 – 40,000) / (149,253.73 – 60,000)

=60,000 / 89,253.73

=0.67

TCPI = 0.67

This means that you can continue with a Cost Performance Index of 0.67 to complete the project.

Please note that if you have calculated the Estimate at Completion using the Earned Value Management formula (EAC = BAC / CPI), the TCPI will be equal to the CPI when you calculate the TCPI the first time. This is because you have assumed that the future cost performance of the project will be the same as the past while calculating the Estimate at Completion (EAC).

We have discussed the technical details of the To Complete Performance Index (TCPI), now let’s look at a real-world example.

A Real-World Example of To Complete Performance Index (TCPI)

Suppose you have a project to paint 10,000 square feet in 10 days. This means you have to paint 1,000 square feet per day.

When you review your progress halfway through, you find that only 3,000 square feet have been painted.

Now, you have five days left and 7,000 square feet yet to be painted. You calculate that you will have to paint 1,400 square feet per day if you are to complete the task within ten days.

This must be your future performance to complete the task on time. This future performance is the To Complete Performance Index (TCPI).

The Cost Performance Index (CPI) is your past performance, and the TCPI is the future performance that you must meet to complete the project within the approved budget.

You can also calculate what will happen if you painted 7,000 square feet to this date. This means that you now have to paint 3,000 square feet in 5 days. Here, you can paint 600 square feet per day to complete the task, which is a more comfortable goal.

Before concluding this post, let’s revisit a few key points:

  • CPI is the past cost performance of the project, and TCPI is the future cost performance of the project.
  • You will calculate the TCPI based on the BAC if you are under budget.
  • You will calculate the TCPI based on the EAC if you are over budget.
  • If the To Complete Performance Index is less than one, you are in a comfortable position.
  • You have to perform better than the past cost performance if the To Complete Performance Index is greater than one. You can continue with the same cost-performance if the To Complete Performance Index is equal to one.

Summary

The To Complete Performance Index is a forecasting tool that helps you to determine the future efficiency of the project. It tells you how to effectively you should use your resources to complete the project on budget. It is good if the TCPI is less than one, while with performance indexes, the reverse is true: if the indexes are greater than one, it is good for the project.

This blog post is the last in a series of seven on earned value management and project forecasting. Please read through my earlier blog posts before reading this post if you’re coming here from a search engine or a referral.

The following are the links for other blog posts:

Have you used the To Complete Performance Index (TCPI) in your project? Please share your experience in the comments section.