You will find detailed explanation of To Complete Performance Index (TCPI) in this article. It includes:
- TCPI definition and meaning
- utility of TCPI in Project Management
- TCPI formulas, examples and calculations
- difference between BAC & EAC formulas
- strategies to solve TCPI mathematical questions for the PMP exam
- difference between Cost Performance Index (CPI) and TCPI
You can also look at the following video to understand TCPI.
To Complete Performance Index (TCPI) in Project Management
What Is TCPI?
To Complete Performance Index (TCPI) is the estimated cost efficiency required to complete the remaining project work within the defined budget.
Another definition could be:
TCPI is the future projected cost efficiency to complete the project within original or revised budget.
Now, these definitions are slightly difficult to understand. Let us understand it with a small scenario.
Let’s assume that you are running a full marathon of 42 km. Before starting the race, you had set yourself a target of 4 hours for finishing the race. After running for 2 hours, you realize that you have completed only 18 km, which is less that 50% of the full distance.
You still want to meet your target of 4 hours. How will you do it?
You will, obviously, increase your speed to complete the race in the defined time limit. In other words, you will cover the remaining distance (24 km) in the remaining time (2 km).
TCPI is very similar to the above example. Let us take a look at a project management scenario.
Project Management Example for TCPI
Consider the following project scenario.
Let us assume that you are managing a project, which is partially complete.
After ascertaining the current EVM values of the project, you found that the Actual Cost (AC) was more than the Earned Value (EV). Essentially, it meant that project is over-budget.
You believe that the remaining project work cannot be completed within the remaining project funds but your Sponsor categorically tells you to complete the Project within the defined Budget.
So, how will you do it?
The obvious answer is that you will have to reduce the cost of remaining work. By reducing the it, you can complete the project within the original budget.
To reduce the cost of remaining work, you will have to somehow increase the project cost efficiency in future.
The future (increased) cost efficiency to complete the project within the defined budget is called To Complete Performance Index (TCPI) in EVM.
As per the PMBOK Guide, TCPI is a measure of the cost performance that is required to be achieved with the remaining resources in order to meet a specified management goal, expressed as the ratio of the cost to finish the outstanding work to the remaining budget.
You can also refer to Max Wideman dictionary to check a few other definitions.
TCPI Formulas And Calculations
Let us use our example from Basics of Earned Value Management.
The project was about building 80 tables. The cost of building 1 table was estimated as 1000 units of money and the total budget was 80000 units of money.
Refer to Table 4 of Basics of Earned Value Analysis. As per the data, the project team:
- has built 35 tables out of a total of 80 tables (work completed).
- has spent 36000 units of money to build 35 tables (actual expenditure).
- needs to build another 45 tables to complete the project (remaining project work).
So, in EVM terms:
total work was 80 tables at 80000 units of money.
BAC = 80000.
completed work is 35 tables – actual expenditure is 36000 units of money.
EV = 35000, AC = 36000, CPI = 0.97
remaining work is 45 tables – remaining funds are 44000 units of money.
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
Clearly EAC> BAC.
The project team would not be able to complete the project within the 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 should be greater than 1.
Generic TCPI Equation
Going by the above definitions and applying pure mathematical logic, we can write a generic TCPI equation as:
TCPI = (monetary value of remaining work)/(remaining funds)
monetary value of remaining work = monetary value of total work – monetary value of completed work
we can rewrite numerator as:
monetary value of remaining work = BAC – EV
remaining funds = total project budget – actual expenditure
remaining funds = total project budget – AC
TCPI = (BAC – EV) / (total project budget – AC)
Let us now determine total project budget. It can be done in two ways.
TCPI BAC Formula
If the project has to be completed within the original budget (BAC), then we can replace total project budget with BAC. The Generic Equation reduces to:
TCPIB = (BAC – EV) / (BAC – AC)
TCPIB = (80000 – 35000) / (80000 – 36000)
TCPIB = 1.02
TCPI EAC Formula
If the project has to be completed within the revised budget (EAC), then we can replace total project budget in the Generic Equation with EAC. The equation reduces to:
TCPIE = (BAC – EV) / (EAC – AC)
Consider Sponsor has imposed a revised budget (EAC) of 78000
TCPIE = (80000 – 35000) / (78000 – 36000)
TCPIE = 1.07
Which TCPI Formula Should Be Used In The PMP Exam?
The Both BAC and EAC formulas are valid. You should use the former if the PMP question asks you calculate TCPI within original budget, otherwise use the latter.
TCPI in Earned Value Management
The project TCPI could be any one of the following:
- TCPI < 1 – it means that project has more funds and less work. It is easier to complete the project.
- TCPI = 1 – it means that project has just enough funds to complete the work.
- TCPI > 1 – it means that project has less funds and more work. It is difficult to complete the project.
There are number of other formulas in EVM. You can read Earned Value Management Formulas for a quick snapshot of all of them. You need to understand the these to answer PMP questions correctly. A mere memorization of the formulas would not help – you may not be able to apply the correct one. It is better understand the concept and then apply the formula(s) as required.
Difference Between CPI And TCPI
Both CPI and TCPI provide a measure of Project’s cost efficiency. However there are basic differences between these two figures.
Cost Performance Index (CPI) is defined as ratio of EV and AC (EV / AC). It is project’s current cost efficiency on the Control Date.
The project CPI could be any one of the following:
- CPI < 1 – it means that value earned value is less than the money spent. Project is over budget.
- CPI = 1 – it means that value earned value is equal to the money spent. Project is going as per the budget.
- CPI > 1 – it means that value earned value 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 the project is (most probably) doing well. On the other hand, if CPI < 1 then the project is likely to be in trouble. In the latter case, the project team needs to take a corrective action(s) to bring the future costs in-line with the budget. This can be done by increasing the future cost efficiency.
As discussed earlier, TCPI is the estimated future cost efficiency.
CPI = (monetary value of completed work)/(expenditure till control date)
TCPI = (monetary value of remaining work)/(remaining funds)
The main differences between CPI & TCPI, can thus, can be enumerated as:
|Represents Project’s Current Cost Efficiency.||Estimates Project’s Future Cost Efficiency.|
|Actual Efficiency of the Completed Project Work.||Estimated Forecast of Efficiency of the Remaining Project Work.|
|Only 1 CPI Formula.||2 Different TCPI Formulas.|
Over To You
What is your take on To Complete Performance Index? Do you have any follow-up questions? You can write your question in the comment section below and I will respond to it.
PMP Exam Formulas
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