To-Complete Performance Index (TCPI) Explained

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 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:

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:

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:

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 UDN Task Manager can assist with your TCPI project management formula

UDN Task Manager 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:

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