Successful project management needs careful planning and monitoring. Project management tools such as the To-Complete Performance Index (TCPI) assist project managers in achieving this objective with little risk.
TCPI predicts the likely outcome of a project and its budgetary compatibility. It demonstrates how to distribute and utilize existing resources to complete projects on time and within budget constraints. The TCPI project management index assists in gaining insight into prospective distressed projects and future budgetary problems.
This article provides comprehensive information about TCPI, its formula and computation, and its application in project management. Let’s begin.
What is TCPI?
To complete performance index (TCPI) is a calculated projection of the cost performance index (CPI), which indicates the effort required to complete a project effectively. It is an Earned Value Management (EVM) capability for forecasting. TCPI PMP outcomes may include:
- The existing budget at completion (BAC)
- A fresh Estimate at Completion (EAC)
- A management-determined outcome
- The objective may be higher, lower, or equal to the current BAC or EAC.
What is TCPI in project management?
TCPI gives insight into any variances in cost and performance compared to the project plan. It indicates how much you must adjust the cost variance to be on track and is computed as follows:
The cost ratio to complete the remaining task to the remaining budget.
These are the results of the TCPI and their implications for your project.
- If TCPI equals 1, the project will continue at the existing budget level
- If TCPI is implemented, the project will come in under budget
- If TCPI is more than 1, the project budget will be exceeded
The TCPI formula for project management is a valuable tool for predicting. However, its precision is contingent on the quality of the input data, which dictates the output.
Some questions you can ask to determine which aspects must be modified to accomplish a project within the initial budget estimate are as follows:
- What are the remaining project risks?
- What is the remaining schedule for the project?
- Are there any problems with the quality of the product?
- Are all resources still available?
- What are the remaining work’s technical requirements?
CPI versus TCPI: what is the difference?
CPI and TCPI are often confused with one another. In the following methods, we can distinguish between these two:
- Definition
CPI is the Cost Performance Index, which measures the cost-effectiveness of a project. The To-Complete Performance Index (TCPI) estimates the cost performance index required to complete a project on time and within budget.
- Formula
CPI is the ratio between the earned value (EV) of completed work and the actual cost (AC) of carrying out the project operations. To calculate the CPI, divide the budgeted expenditure for the completed project by the actual expenses.
TCPI is the ratio of the remaining budget to the cost to complete the unfinished task. Subtract the earned value (EV) from the total project budget (BAC) and divide the result by the remaining project budget (BAC minus AC).
- Results
The project is on or under budget if the CPI is equal to or greater than one. The project is likely over budget if the CPI is less than one.
If TCPI is equal to or below one, the project is on or under budget. If TCPI is more than one, the project is likely over budget.
- Inferences
The CPI value informs the project manager of the status based on data collected to date. The TCPI alerts the project management of probable future occurrences.
Both CPI and TCPI examine where a project is and what it needs to reach where it needs to go. Together with other EVM measures, they are commonly used to forecast, plan, and influence project requirements.
TCPI formula explained
Let’s examine in detail the fundamental values required to calculate the TCPI:
- Earned Value (EV):
For any amount of completed work the TCPI is calculated.
EV = % completed work budget.
- Actual Cost (AC):
The cost incurred during the period spent calculating the TCPI.
AC = Costs incurred within the budget.
- Estimate at Completion (EAC):
This is the estimated cost of completing the entire project. It is the total of the actual cost to date and the estimated cost to complete.
EAC = AC + (BAC – EV).
- Budget at Completion (BAC):
This is the sum of all budgets that have been planned.
If the original budget for the project is $2,000, the BAC is also $2,000.
- TCPI formula
TCPI = Remaining Work Volume / Remaining Budget
TCPI=(BAC – EV) / (BAC – AC)
Remember that the formula for leftover (or residual) work is the total budget (BAC) minus earned value (EV).
What is an action plan’s purpose?
The results of the TCPI may prompt project managers to make a mid-project course correction to minimize cost overruns or failure. This impacts the action plan, a checklist of all actions and resources required to execute a project.
Plans of action give structure for controlling and carrying out projects. They assist in organizing and completing project duties to ensure no processes are skipped. Action plans facilitate progress monitoring.
They display start and end dates and the duration of each task or activity so that you can monitor the project’s budget and determine if your time and resource allocations need to be adjusted.
Why are action plans crucial for project management?
Action plans aid in outlining the essential phases of a project’s execution and facilitate successful teamwork on current initiatives.
An excellent action plan outlines all the steps necessary to complete the project and breaks down the preparation of project goals, tasks, resources, responsibilities, and deadlines. Calculating the TCPI before outlining the action plan leads to a more viable strategy.
Example of calculating TCPI using BAC
The Budget at Completion can be used as a parameter for the TCPI project management formula. To determine the remaining cash, deduct the actual cost (AC) from the initial budget (BAC).
Budget at Completion minus Actual Expenditures = Remaining Funds (BAC – AC)
The TCPI formula will appear as follows:
(BAC – EV) / (BAC – EV) (BAC – AC)
Example: You are working on a wooden cabin that must be completed within six months. After three months, you’ve spent $11,000 building the cottage and completed sixty percent of it. The estimated cost of the project, or BAC, is $20,000.
This can be deduced from the preceding statement:
$20,000 is the Budget at Completion (BAC)
Actual Cost (AC) = $11,000
The Planned Value (PV) is 50% of $20,000, or $10,000.
CPI (Cost Performance Index) = EV / AC = 12,000 / 11,000 = 1.09
Since the CPI is 1.09, which is more than one, the data demonstrates that you are under budget. Therefore, you will employ the TCPI BAC formula.
TCPI Blood Alcohol Concentration = (BAC – EV) / (BAC – AC) = (20,000 – 12,000) / (20,000 – 11,000) = 8,000 / 9,000 = 0.88
This indicates that you will complete the assignment with a CPI of 0.88.
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