Running successful projects requires calculated planning and monitoring. Project management tools like the To-Complete Performance Index (TCPI) help project managers achieve this with as little risk as possible.
TCPI forecasts a project's possible outcome and alignment with the budget. It shows how to allocate and use available resources to deliver projects on time and within budget. The TCPI project management index helps gain insights into potential projects in distress and future budgetary risks.
This article explains all you need to know about TCPI, its formula and calculation, and how it's used in project management. Let’s get started.
What is TCPI?
To-complete performance index (TCPI) is a calculated forecast of the cost performance index (CPI), which shows the work needed to be completed for a project to be delivered successfully. It’s an Earned Value Management (EVM) forecasting capability. TCPI PMP results may be:
- The existing budget at completion (BAC)
- A new Estimate at Completion (EAC)
- A management-defined result
The target may be greater, lower, or the same as the existing BAC or EAC.
What is TCPI in project management?
TCPI provides insight into any cost and performance variations from the project plan. It shows how much you need to adjust the cost variance to stay on track and is calculated as:
Ratio of cost to finish the residual work / Remaining budget
Below are the results of TCPI and what they mean for your project:
- If TCPI = 1, the cost of the project will proceed at the existing budget
- If TCPI the cost of the project will be less than the existing budget
- If TCPI > 1, the cost of the project will exceed the existing budget
The TCPI project management formula is an excellent forecasting tool. However, its accuracy depends on the quality of the input data, which determines the results. A few questions you can ask to learn which factors to adjust to complete a project at the initial planned budget include:
- What are the project's remaining risks?
- What is the remaining project schedule like?
- Are there any difficulties with the quality of the product?
- Are all resources still available?
- What are the technical requirements of the remaining work?
CPI vs. TCPI: what's the difference?
CPI vs. TCPI may easily be mistaken for one another. We can differentiate between the two in the following ways:
Definition
CPI is the Cost Performance Index, which helps assess a project's cost-effectiveness. TCPI is the To-Complete Performance Index, which helps measure the cost performance index required to finish a project on budget.
Formula
CPI is the ratio of the earned value (EV) of finished work to the actual cost (AC) of executing the project activities. Divide the planned amount for the job completed by the actual expenses to get the CPI.
TCPI is the ratio of the cost to finish the unfinished work divided by the remaining budget. Remove the earned value (EV) from the overall budget of the project (BAC) and divide the value by the remaining (unspent) project budget (BAC minus AC).
Results
A CPI equal to one or greater than one indicates that the project is within or under budget. If the CPI is less than one, the project is probably over budget.
If TCPI is equal to or less than one, the project is within or under budget. If the TCPI is more than one, the project is likely over budget.
Inferences
The CPI value informs the project manager of the project's current condition based on data acquired up to that point. The TCPI informs the project manager of what is likely to occur in the future.
CPI and TCPI are complementary in that they both assess where a project is and what it needs to get where it needs to go. They are frequently used with other EVM indices to forecast, plan, and influence project requirements.
TCPI formula explained
Let's look closely at the fundamental values used in calculating TCPI:
- Earned Value (EV): This is the amount of work done by the time the TCPI is calculated.
EV = % work completed × budget. - Actual Cost (AC): This is the cost spent by the time of calculating the TCPI.
AC = Cost incurred on budget. - Estimate at Completion (EAC): This is the projected cost of finishing all project work. It's represented as the sum of the actual cost to date and the estimate to finish.
EAC = AC + (BAC – EV). - Budget at Completion (BAC): This is the total of all planned budgets.
If the initial project budget is $2,000, the BAC is $2,000.
TCPI formula
TCPI = Amount of remaining work / Remaining budget
TCPI = (BAC - EV) / (BAC - AC)
Note that the formula for remaining (or residual) work is the total budget (BAC) minus earned value (EV).
What is the purpose of an action plan?
TCPI results may lead project managers to pivot halfway through a project to avoid cost overrun or failure. This affects the action plan — a checklist of all tasks and resources needed to complete a project.
Action plans provide structure for managing and executing projects. They help order and complete project tasks to ensure you don't skip any steps. Action plans assist in keeping track of progress. They show start and end dates and the duration of each task or activity to keep track of the project budget and determine if you need to adjust your time and resource allocation.
Why are action plans important in project management?
Action plans help outline the essential stages involved in executing a project and enable teams to collaborate effectively on ongoing projects.
An excellent action plan spells out all of the steps required to deliver the project successfully and breaks down the preparation of project goals, tasks, resources, responsibilities, timelines, and results. Calculating the TCPI before detailing the action plan guides you towards a more feasible plan.
Example of a TCPI calculation using BAC
To calculate the TCPI project management formula, we may utilize Budget at Completion as the parameter. In this case, subtract the actual cost (AC) from the original budget (BAC) to arrive at the residual funds.
Residual funds = Budget at Completion – Actual Cost (BAC – AC)
The TCPI formula will look like this:
TCPI = (BAC – EV) / (BAC – AC)
Example: You're working on a wooden cabin that needs to be finished in six months. The project's anticipated cost, or BAC, is $20,000. After three months, you've spent $11,000 and completed 60% of the cabin.
We can find the following from the above statement:
Budget at Completion (BAC) = $20,000
Actual Cost (AC) = $11,000
Planned Value (PV) = 50% of 20,000 = $10,000
Earned Value (EV) = 60% of 20,000 = $12,000
CPI (Cost Performance Index) = EV / AC
= 12,000 / 11,000
= 1.09
The above information shows you are under budget since the CPI is 1.09, which is greater than one. Hence, you'll use the TCPI BAC formula.
TCPI BAC = (BAC – EV) / (BAC – AC)
= (20,000 – 12,000) / (20,000 – 11,000)
= 8,000 / 9,000
= 0.88
This suggests you'll finish the project with a CPI of 0.88.
Example of a TCPI calculation using EAC
Another method of calculating the TCPI is using the Estimate at Completion (EAC) as the parameter. In this case, the residual funds are determined by subtracting the actual cost (AC) spent to date from the EAC.
Residual funds = Estimate at Completion – Actual Cost (EAC – AC)
The TCPI formula will look like this:
TCPI = (BAC – EV) / (EAC – AC)
Example: You have a 12-month construction project to finish. The construction project has a budget of $200,000. After six months, you've spent $110,000, with only 40% of the work completed.
We can find the following from the above statement:
Budget at Completion (BAC) = $200,000
Actual Cost (AC) = $110,000
Planned Value (PV) = 50% of 200,000 = $100,000
Earned Value (EV) = 40% of 200,000 = $80,000
CPI (Cost Performance Index) = EV / AC
= 80,000 /110,000
= 0.72
Thus, CPI = 0.72
In this scenario, you're over budget because the CPI is less than one. Now you'll apply the TCPI EAC formula to determine the new estimate at completion.
TCPI EAC = BAC / CPI
= 200,000 / 0.72
= $277,777.78
Hence, Estimate at Completion (EAC) = $277,777.78
Since TCPI = (BAC – EV) / (EAC – AC)
= (200,000 – 80,000) / (277,777.78 – 110,000)
=120,000 / 167,777.78
= 0.72
TCPI = 0.72
This suggests you'll finish the road construction project with a CPI of 0.72.
How Wrike can assist with your TCPI project management formula
Wrike assists project managers with planning, tracking, and aligning project goals, budgets, and activities. With our dedicated PMO software, you can use the following features to monitor the TCPI index in upcoming projects:
- Use Wrike's custom fields to track your project budget in real-time.
- Keep track of project assignments and modifications to avoid scope creep.
- Use Wrike's user-friendly dashboard to track your project's progress, estimate delays, and address issues proactively to avoid risks.
- Estimate future project costs with forecasting and real-time expense tracking.
- Estimate project costs and keep track of budgets effectively.
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