To Complete Performance Index – TCPI Formula & Calculations Explained

To Complete Performance Index – Definition, Example, & Formulas

to complete performance index

To Complete Performance Index (TCPI) is an estimate of future cost efficiency of the project. I have written a series of articles on Earned Value Management. In this article, I will explain TCPI Formulas and their utility using an example. This post is written in continuation to following posts:

You should read these articles before continuing further. They will give you a deeper understanding of Earned Value Management (EVM). You can also refer to Max Wideman dictionary to check a standard definition of TCPI.

 

TCPI and CPI – The Difference

TCPI is different from Cost Performance Index (CPI). CPI is a measure current cost efficiency of the project, whereas TCPI is a measure of future cost efficiency. There is only 1 CPI Formula, which determines the current performance of the project. However, there are 2 TCPI Formulas that can be used to estimate and forecast future performance. TCPI is usually estimated by analyzing current performance of the project. The main differences between TCPI and CPI can be enumerated as:

  • CPI is the project’s current cost efficiency, whereas TCPI is the project’s future cost efficiency.
  • CPI is an actual efficiency of the completed work, whereas TCPI is an estimated efficiency of the remaining work.

 

Earned Value Performance – A Scenario

You are managing a project. The project is running over-budget for some reason(s). You believe that the remaining work cannot be completed within the remaining funds. But your Sponsor tells you to to complete the Project within Budget.

How will you do it? The obvious answer would be to reduce the cost of remaining work. By reducing the cost of remaining work, you can complete the work at an increased cost efficiency.

The increased (future) cost efficiency can be determined by calculating To Complete Performance Index (TCPI).

 

Earned Value Management – Basic Definitions

Let us quickly review some of the EVM terms before we look at TCPI.

Budget At Completion (BAC) – Approved budget at the start of a project.

Earned Value (EV) – EV is the monetary value of the completed work by the Control Date.

Actual Cost (AC) – AC is actual project expenditure (for the completed work) by the Control Date.

Cost Performance Index (CPI) – CPI is defined as ratio of EV and AC (EV / AC). It is Project’s cost efficiency on the Control Date.

Estimate At Completion (EAC) – If there is a Cost Variance (CV) the original budget (BAC) may no longer be applicable. EAC is the revised estimated budget of the entire project.

Let us analyze CPI further. On the Control Date, Project CPI could be one of the following:

  • CPI < 1 – it means that value earned is less than the money spent – project is over budget.
  • CPI = 1 – it means that value earned is equal to the money spent – project is going as per the budget.
  • CPI > 1 – it means that value earned is more than the money spent – project is under budget.

CPI is a measure of current cost efficiency of the project. If CPI ≥ 1, then project is (most probably) doing well. If CPI < 1 then there is trouble and the project team needs to take corrective action. This corrective action can be taken by bringing the future costs in-line with the budget. This can be done by increasing the future cost efficiency.

As discussed earlier, this estimated future cost efficiency is called To Complete Performance Index.

 

To Complete Performance Index Example

Let us use our example from Basics of Earned Value Management.

Given

EV = 35000

AC = 36000

CPI = 0.97

BAC = 80,000

Refer to EAC Formula IV – EAC = BAC/CPI

If the project team continues to work at the current cost efficiency (0.97) then

EAC = 80000/0.97

EAC = 82,474.23

Inference

Clearly EAC> BAC. The project team would not be able to complete the project within original budget (BAC), if it continues to perform at the current cost efficiency (CPI).

If the project team wants to complete the project within original budget (BAC), then the future cost efficiency (TCPI) should be greater than 1.

 

To Complete Performance Index Formula And Calculation

Generic TCPI Equation

TCPI is future cost efficiency. Going by the definition and applying pure mathematical logic, we can write a generic TCPI equation as:

TCPI = (monetary value of remaining work)/(remaining funds)

Numerator

monetary value of remaining work = monetary value of total work – monetary value of completed work

Refer to Basics of Earned Value Analysis or Earned Value Management System Explained in Easy Language, we can rewrite numerator as:

monetary value of remaining work = BAC – EV

Denominator

remaining funds = total budget – actual expenditure

Refer to Basics of Earned Value Analysis or Earned Value Management System Explained in Easy Language, we can rewrite numerator as:

remaining funds = total budget – AC

Final TCPI Equation

TCPI = (BAC – EV) / (total budget – AC)

Let us now determine total budget.

 

TCPI Formula I

If the project has to be completed within original budget (BAC), then we can replace total budget in the TCPI equation with BAC. The equation reduces to:

TCPIB = (BAC – EV) / (BAC – AC)

Calculation

TCPIB = (80000 – 35000) / (80000 – 36000)

TCPIB = 1.02

 

TCPI Formula II

If the project has to be completed within revised budget (EAC), then we can replace total budget in the TCPI equation with EAC. The equation reduces to:

TCPIE = (BAC – EV) / (EAC – AC)

Calculation if Sponsor imposes a budget (EAC) of 78000

TCPIE = (80000 – 35000) / (78000 – 36000)

TCPIE = 1.07

 

Note For PMP Aspirants

There are number of formulas in EVM. You can read Earned Value Management Formulas for a quick snapshot of all the EVM formulas. You need to understand the these formulas to answer PMP questions. A mere memorization of the formulas would not help – you may not be able to apply the correct formula. It is better understand the concept and then apply the formula(s) as required.

I have also compiled a PMP Formulas Pocket Guide. You can download it free for exam prep. It is the most comprehensive pocket guide that is based on the PMBOK Guide 5th Edition. If you are looking for more, you can also buy detailed PMP Exam Formula Study Guide by Cornelius Fichtner. It contains explanations of all the formulas along with examples & 105 PMP practice questions.

EVM is difficult topic. If you still have any confusion on TCPI or EVM, you can write a comment and I will respond to it.

 

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Disclosure: This article contains affiliate links – it means that, if you buy from any of these links, then I will receive a small commission that would help me in maintaining this blog for free. However, for you, there is no extra cost. I recommend only those products that I believe will definitely help the certification aspirants.

Praveen Malik, PMP is a certified Project Management Professional (PMP®) with a rich 20+ years of experience. He is a leading Project Management Instructor and Consultant. He regularly conducts Project Management workshops in India & abroad.

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