# How To Use To Complete Performance Index (TCPI) Formulas In PMP?

**To Complete Performance Index (TCPI)** is a forecasting technique of Project Management (PM). It is the cost efficiency required to complete a project within a defined budget.

I have written this post to provide detailed explanation of To Complete Performance Index. After reading this post, you will

- understand TCPI definition and meaning.
- learn about TCPI formulas and calculations through examples
- know the difference between BAC & EAC formulas
- understand utility of TCPI in Project Management
- grasp the difference between Cost Performance Index (CPI) and TCPI
- know how to solve TCPI PMP questions

## To Complete Performance Index (TCPI)

### What Is TCPI?

Consider a small scenario.

You are running a full marathon of 42 km. Before starting the race, you had set a target of 4 hours for yourself. After running for 2 hours, you realize that you have completed only 18 km. You still want to meet your target of 4 hours. How will you do that?

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 remaining time (2 km).

TCPI is very similar to the above example. Let us take a look at a project management scenario.

### TCPI In Project Management

Consider the following project scenario.

You are managing a project. The project is partially complete. After calculating the cost efficiency (CPI) of the project, you found that project is over-budget. The Actual Cost (AC) was more than the Earned Value (EV). You believe that the remaining project work cannot be completed within the remaining project funds. But your Sponsor tells you to complete the Project within the defined Budget.

So, 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 project within the original budget.

How will you reduce the cost of remaining work? You will have to somehow increase your cost efficiency to complete the remaining work.

The future (increased) cost efficiency to complete the project within a defined budget is called To Complete Performance Index (TCPI) in EVM.

### TCPI Definitions

It 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.

PMBOK Guide

Ain’t that Slightly confusing? It is. Although PMBOK Guide’s definition is absolutely correct, it is a bit difficult to understand for a newcomer. So let me write a simple definition.

Future projected cost efficiency to complete the project within original or revised budget.

You can also refer to Max Wideman dictionary to check a few other definitions.

### 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:

- CPI represents project’s current cost efficiency, whereas TCPI estimates project’s future cost efficiency.
- CPI is actual efficiency of the completed project work, whereas TCPI is estimated forecast of efficiency of the remaining project work.
- There is only 1 CPI Formula, while there are 2 different TCPI Formulas (as we shall see in the next section).

## TCPI Formulas And Calculations

### TCPI Example

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*)

**Numerator**

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

**Denominator**

*remaining funds* = *total project budget* – actual expenditure

*remaining funds *=* total project budget *– AC

**Final Equation**

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:

TCPI_{B} = (BAC – EV) / (BAC – AC)

**Calculation**

TCPI_{B} = (80000 – 35000) / (80000 – 36000)

TCPI_{B} = 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:

TCPI_{E} = (BAC – EV) / (EAC – AC)

**Calculation**

Consider Sponsor has imposed a revised budget (EAC) of 78000

TCPI_{E} = (80000 – 35000) / (78000 – 36000)

TCPI_{E} = 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.

## Final Thoughts on 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.

### 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.

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