Dear PM Advisor. April 15, 2013

Dear PM Advisor, What's TCPI?

Earned Value in Manhattan

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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.

Earned Value

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.

Good luck,

PM Advisor.

Send your questions to bruce@RoundTablePM.com