To Complete Performance Index

To Complete Performance Index – TCPI is a tool that helps project manager to estimate the budget required for the project completion.

It also calculates the efficiency required in remaining allocated cost/budget to achieve a target estimate at completion EAC.  This budget could be the initially approved budget (BAC), or calculated on (Estimate at Completion).

Before digging in deep into TCPI, I request you to first read Earned Value Management

Keep in mind that TCPI formula will help you to crack a number of questions in PMP exam.

How to Calculate TCPI?

TCPI can be calculated by dividing the remaining work by remaining cost.

TCPI = (Remaining Work) / (Remaining Funds)

Remaining work can be calculated by subtracting the earned value from total budget.

Remaining Work = Total budget – Earned Value

Remaining Work = (BAC – EV)

There could be two different scenarios, under budget and over budget. Calculation for both these scenarios will be different.

Scenario I: Under Budget

In this scenario remaining budget is calculated by subtracting the “actual cost incurred to date” from the “initial budget”.

Remaining funds = Budget at Completion – Actual Cost

Remaining funds = BAC – AC

Similarly TCPI can be calculated by:

TCPI = (BAC – EV) / (BAC – AC)

Example of TCPI: Case I

You are working on a project to be completed in 48 months. The BAC of the project is 400,000 USD. 24 months have passed, 220,000 USD have been consumed with only 60% work completion. Find out the To Complete Performance Index (TCPI) for this project.

Given Data:

Budget at Completion (BAC) = 400,000 USD

Actual Cost (AC) =220,000 USD

Planned Value (PV) = 50% of 400,000 = 200,000 USD

Earned Value (EV) = 60% of 400,000

= 240,000 USD

Cost Performance Index (CPI) = EV / AC

= 240,000 / 220,000

= 1.09

As the cost performance index (CPI) is 1.09, greater than 1, you are under budget so the following formula will be used to calculate TCPI

TCPI = (BAC – EV) / (BAC – AC)

= (400,000 – 240,000) / (400,000 – 220,000)

= 160,000 / 180,000

= 0.89

This means that for remaining part of project we need to continue with CPI of 0.89 to complete the project within given budget.

Scenario II: Over Budget

In this scenario, remaining funds will be calculated by subtracting the actual cost till to date from the Estimate at Completion.

The remaining funds = Estimate at Completion – Actual Cost

Total remaining funds = EAC – AC

Here, the TCPI will gives 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 are working on a project to be completed in 24 months. The budget of the project is 200,000 USD. 1 year has passed, and 120,000 USD have been consumed, but on closer analysis, you find out that only 40% of the work has been completed so far. Find the To Complete Performance Index (TCPI) for this project.

Given Data:

Budget at Completion (BAC) = 200,000 USD

Actual Cost (AC) = 120,000 USD

Planned Value (PV) = 50% of 200,000 = 100,000 USD

Earned Value (EV) = 40% of 200,000

= 80,000 USD

Cost Performance Index (CPI) = EV / AC

= 80,000 /120,000

= 0.67

Hence, the Cost Performance Index (CPI) = 0.67

So as the cost performance index (CPI) is 0.67, less than one, you are over budget. Now to calculate new Estimate at Completion and use a formula based on the EAC.

Estimate at Completion (EAC) = BAC / CPI

= 200,000 / 0.67

= 298,507.5 USD

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

Now, TCPI = (BAC – EV) / (EAC – AC)

= (200,000 – 80,000) / (298,507.5 – 120,000)

=120,000 / 178,507.5 =0.67

TCPI = 0.67

This implies that we can continue with this CPI of 0.67 to complete the project within budget.

Real World Example

Suppose you are project manager for a project to paint 10,000 square feet in 20 days.

This means 500 square feet of paint work is required per day.

Progress was reviewed after 10 days and you find out that only 4,000 square feet work has been done.

Now we are only left with 10 days in which 6,000 square feet of paint work is to be done (600 square feet per day).

This can be termed as TCPI for next 10 days. So the CPI is measuring tool for past performance and TCPI is measuring tool for future projects.

Wrap Up

So to summarize we can say that To complete performance index – TCPI is a very useful forecasting tool to measure the actual efficiency of project and what adjustments are required for successful conclusion of project within defined parameters.

FAQ’s

What is the relationship between TCPI & CPI?

CPI shows the current cost efficiency of project whereas TCPI estimates future cost efficiency

How is BAC calculated in project management?

BAC can be calculated from following formula

TCPI = (BAC-EV)/ (BAC-AC)

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