Earned Value Management

To Complete Performance Index (TCPI)

The To Complete Performance Index (TCPI) is a comparative Earn Value Management (EVM) metric used primarily to determine if an independent estimate at completion is reasonable. It computes the future required cost efficiency needed to achieve a target Estimate at Completion (EAC).

TCPI Definition: The To Complete Performance Index (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. (PMBOK Guide)

Purpose of To Complete Performance Index (TCPI)

The TCPI helps Program Managers and Earned Value Professionals determine the future efficiency of a project. It tells them how to use their resources to complete the project on budget effectively.

TCPI answers the basic project question: How efficiently must we use our remaining funds?

PMI 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 Budget at Completion (BAC) or the Estimate at Completion (EAC).”

How to Calculate the To Complete Performance Index (TCPI)

The TCPI is computed by dividing the budget remaining, which is represented by subtracting the cumulative Actual Cost Work Performed (ACWP) from the target EAC, into the budgeted cost of work remaining, which is represented by subtracting the cumulative Budgeted Cost Work Performed (BCWP) from the Budget at Completion (BAC). The TCPI is compared to the cumulative Cost Performance Index (CPI) to determine if a target EAC is reasonable.

TCPI Formulas
TCPI Formulas

EVMS Glossary of Terms:

AC = Actual Cost
EV = Earn Value
BAC = Budget at Completion
BCWP = Budgeted Cost Work Performed
EAC = Estimate at Completion
ACWP = Actual Cost Work Performed

The TCPI is:

  • Reasonable: if TCPI is within .5 of CPI
  • Overly Optimistic: if TCPI is greater than .5 of CPI
  • Overly Conservative: if CPI is more than .5 of TCPI

Example Scenario:

The project you are working on is 12 months long and has a budget at Completion of $100,000.  You are currently at 6 months and spent $60,000 USD, and 60% of the work has been completed.

Question: Calculate the To Complete Performance Index (TCPI) for your project.

  • Budget at Completion (BAC) = $100,000
  • Actual Cost (AC) = $55,000 USD
  • Planned Value (PV) = 50% of $100,000 = $50,000 USD
  • Earned Value (EV) = 60% of 100,000 = $60,000
  • Cost Performance Index (CPI) = EV / AC = 60,000 / 55,000 = 1.1

Since the Cost Performance Index (CPI) 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)
  • = 100,000 – 60,000) / (100,000 – 55,000)
  • = 40,000 / 45,000
  • = 0.89

Answer: The total cost performance index of 0.89 is okay to complete the project. Since it’s within .5 of the CPI of 1.1: It’s deemed Reasonable.

Note: Since the CPI is close to 1, BAC is used in the denominator equation instead of EAC. If the project was over budget, an estimate at completion (EAC) would be used.

The Main Difference Between the Cost Performance Index (CPI) and To Complete Performance Index (TCPI)

Cost Performance Index (CPI) and TCPI both are a measurement of a program’s cost efficiency but CPI is current and TCPI is future/forecast. The main differences between CPI & TCPI are:

  • CPI represents the project’s current cost-efficiency
  • TCPI estimates the project’s future cost-efficiency
  • CPI is the actual efficiency of the completed work
  • TCPI is the estimated forecast of efficiency of the remaining work
  • There are 2 different TCPI Formulas vs. 1 CPI Formula

What a Program Manager Needs to Know When Calculating To Complete Performance Index (TCPI)

To Complete Performance Index (TCPI) is key measure program managers use to judge how well and efficiently their projects run. It helps determine how much money needs to be spent on the rest of the work to reach certain project goals. Here are some important things a program manager should know about how to calculate the TCPI correctly:

  1. Definition: TCPI is the ratio between the leftover budgeted cost of work (BCWR) and the remaining funds available (RFAC). It shows how quickly the job needs to be done to stay within the budget.
  2. Wanted TCPI: The project goals will tell the program manager what the wanted TCPI is. If the value is greater than 1, then more speed is needed. The performance is good enough if the value is less than 1.
  3. Earned Value Management (EVM): TCPI uses EVM data, which includes measures like planned value (PV), earned value (EV), and actual cost (AC). For TCPI to be calculated correctly, EVM tracking must be accurate.
  4. Predicting the project’s future: The program manager must have accurate predictions for BCWR and RFAC. This means correctly figuring out how much work is left and considering any budget or scope changes.
  5. Cost Control Measures: Program managers can use different measures, such as resource optimization, scope changes, and cost-saving efforts, to get the TCPI they want.
  6. Risk Assessment: When calculating TCPI, consider possible risks and unknowns affecting project prices. Plans for what to do in case of problems and ways to reduce risks can help keep or improve TCPI.
  7. Communication: The program manager should make sure that all stakeholders understand the TCPI values and what they mean for the project’s success and what to expect in the future.
  8.  Continuous Monitoring: Keeping track of and updating TCPI values regularly throughout the lifecycle of a project lets people make decisions ahead of time and take corrective steps at the right time.

Integration with Other Metrics

The TCPI should be looked at with other performance indices like the Cost Performance Index (CPI) and the Schedule Performance Index (SPI) to get a full picture of the health of a project. By understanding the TCPI and figuring it out correctly, program managers can make good choices, keep costs under control, and ensure projects turn out well.

AcqNotes Tutorial

AcqTips:

  • TCPI is a new term that recently appeared in the new Project Management Institute’s (PMI) Project Management Body of Knowledge (PMBOK) 4th Edition.

AcqLinks and References:

Updated: 6/29/2023

Rank: G2

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