Dear PM Advisor, What's TCPI?
Earned Value in Manhattan
Dear Earned Value,
Judging by your name, you are aware that TCPI is one of the calculations you use in Earned Value Management. It is pretty simply explained though a little more difficult to calculate. In general it means: What return do you need to get on your future project spends to ensure you complete the project on budget?
Let's look at a simple example.
So in this case we have a Cost variance, CV = EV - AC of $10,000
And we have a Schedule Variance, SV = EV - PV of $5,000
Cost Performance Index, the indication of how much value we are getting for every dollar spent is:
CPI = EV/AC = 20/30 = 0.67
In order for us to complete the project on budget, we need to have a To Complete Performance Index TCPI far enough above 1. The formula is: TCPI = (BAC-EV)/(BAC-AC) where BAC is Budget at Completion or the original project budget.
Let's see how this works in our example.
TCPI = (50-20)/(50-30) = 30/20 = 1.50
So on the above project, we need to get $1.50 for every future dollar spent to ensure we complete on budget. A tall order but one that sounds right given that we are already halfway through the project and spending a lot more than we were supposed to.
Send your questions to bruce@RoundTablePM.com