In this article on Earned Value Reporting we’ll examine the To Complete Cost Performance Index. In a nutshell, the To Complete Cost Performance Index tells us the cost performance that is required to complete a given project for it’s original budget based on how it is performing right now.
The book “The Project Management Question and Answer Book” by Michael Newell and Marina Grashina is the source for much of this overview.
What is the to complete cost performance index?
The to complete cost performance index, TCCPI, tells us the required cost performance that is necessary to complete the project for the original budget based on the performance of the project as of today.
The to complete cost performance index is a seldom-used indicator, and there are some difficulties in its use. The TCCPI is calculated by dividing the work remaining by the money remaining in the budget to do it. The remaining work in a project is simply the difference between the work already accomplished, the BCWP, and the total work of the project, the BAC. You will recall that when the project is completed, the BCWP must exactly equal the BAC. Mathematically it is impossible for this not to happen since the BAC is equal to the sum of the BCWP and is also equal to the sum of the BCWS. The remaining budget for the project is simply the difference between the total budget for the project, again the BAC, and the amount of money that has been spent to date, the ACWP.
TCCPI = (BAC – BCWP) / (BAC – ACWP)
It can be seen that as a project’s cost performance index moves below one, the TCCPI will increase and become greater than 1. Although called an “index”, this is not really accurate since all indexes indicate something bad when they fall below one and this index indicates something bad when it is greater than one.
The TCCPI gives us a rough estimate of the performance that is required for the remaining portion of the project in order for the project to be completed for the original budget. A TCCPI of 1.33 indicates that the project team must perform with a CPI of 1.33 from now until the project is completed in order for the project to be completed at the original budget.
There is a mathematical difficulty with this term as well. If a project is over budget toward the end of the project, it is possible for the BAC and the ACWP to be equal. This produces a division by zero and a point of discontinuity.
Under normal conditions it results in a value that indicates the required performance that the project must have from now until the end of the project.
Example:
Suppose a project is somewhere near 50 percent complete:
BCWS = $100,000
BCWP = $95,000
ACWP = $97,000
BAC = $200,000
CV = BCWP – ACWP
CV = -$2,000
What is the TCCPI?
TCCPI = (BAC – BCWP) / (BAC – ACWP)
TCCPI = (200,000 – 95,000) / (200,000 – 97,000)
TCCPI = 1.02
In this example the project would be required to do all of the remaining work at a 2 percent higher cost performance than was originally planned. This may be particularly difficult since the cost performance index to date is only 98 percent. We will be asking the project team to improve their cost performance by some 4 percent.
Notice that if the cost variance remains the same as the end of the project approaches, the TCCPI increases rapidly. Suppose we have the following when the project is approximately 95 percent complete:
BCWS = $195,000
BCWP = $190,000
ACWP = $192,000
BAC = $200,000
CV = BCWP – ACWP
CV = -$2,000
What is the TCCPI?
TCCPI = (BAC – BCWP) / (BAC – ACWP)
TCCPI = (200,000 – 190,000) / (200,000 – 192,000)
TCCPI = 1..2
As we approach the end of the project, the cost variance has not changed, but the TCCPI has changed from 1.02 to 1.25. This is an indicator that the cost variance will be much more difficult to recover now than it was earlier in the project.