What are the best practices and pitfalls of applying TCPI in EVM?

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Earned value management (EVM) is a technique for measuring project performance and progress by comparing the actual work done, the planned work, and the budget. One of the key metrics in EVM is the to-complete performance index (TCPI), which indicates how efficiently the remaining work must be performed to achieve the target cost or budget at completion. In this article, you will learn what are the best practices and pitfalls of applying TCPI in EVM, and how to use it to monitor and control your project.

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1 TCPI formula and meaning

The TCPI formula depends on whether you are using the budget at completion (BAC) or the estimate at completion (EAC) as your target cost. The BAC is the original budget of the project, while the EAC is the revised estimate based on the current performance and assumptions. The TCPI formula for BAC is:

TCPI = (BAC - EV) / (BAC - AC)

where EV is the earned value, or the value of the work completed, and AC is the actual cost, or the cost incurred for the work done.

The TCPI formula for EAC is:

TCPI = (BAC - EV) / (EAC - AC)

The TCPI value tells you how much you need to improve your cost performance ratio (CPR) to meet your target cost. The CPR is the ratio of EV to AC, and it measures how efficiently you are spending your budget. A TCPI value of 1 means that you need to maintain your current CPR to meet your target cost. A TCPI value greater than 1 means that you need to improve your CPR, or spend less for the remaining work, to meet your target cost. A TCPI value less than 1 means that you can afford to spend more for the remaining work, or relax your CPR, to meet your target cost.

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Dan Lynch

Senior EVMS/IPM Consultant
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I offer this to make the formulas easier to understand: a) TCPI to EAC = Work Remaining / ETC b) The TCPI to BAC formula does not provide any useful info as the EAC overrides the BAC for future performance measurement.

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2 Best practices of applying TCPI

Applying TCPI in EVM involves several best practices. Firstly, use TCPI as an indicator of the project's cost performance and health to alert you to potential cost overruns or savings. Additionally, compare TCPI with CPI to assess the feasibility and realism of your target cost. CPI is the ratio of EV to AC and measures your actual cost performance. When your TCPI is significantly higher than your CPI, it suggests that you have a very aggressive or unrealistic target cost, whereas if your TCPI is significantly lower than your CPI, it implies that you have a very conservative or easy target cost. Finally, use both TCPI for BAC and TCPI for EAC to evaluate your project's cost performance from different perspectives. This will allow you to monitor your project's cost variance, forecast, and trends.

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3 Pitfalls of applying TCPI

When applying TCPI in EVM, it is important to remember not to rely on it alone to measure and manage cost performance. As it is only one of the many metrics in EVM, other metrics and tools such as variance analysis, earned schedule, risk register, and stakeholder engagement plan should be used for a comprehensive and balanced view of the project's performance and progress. Additionally, TCPI is a dynamic metric that changes as the project progresses and target cost changes, so it should be updated regularly and expectations and actions recalibrated accordingly. Furthermore, one must be aware of the factors and assumptions behind the TCPI calculation. As these values are derived from project baselines and estimates, accuracy and reliability must be validated and verified, adjusting them as needed for changes and uncertainties in the project.

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Karlo F.

Director of Project Controls at pmXperts | EVMS & Deltek Cobra SME | Aerospace/Defense/DOE | Program Performance & Operational Excellence | U.S. Marine Corps Veteran | Your Partner in Project Controls & EVM Excellence!
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When applying TCPI in EVM, don't rely solely on it for tracking project performance. As a dynamic metric, TCPI changes with project adjustments and requires regular recalibrations/adjustments. CAMs should integrate TCPI with other metrics, variance analysis, risks, and stakeholder plans for a balanced view, aiding early issue identification and strategic decision-making. Since TCPI calculations stem from project baselines and estimates, their accuracy must be continually validated and adjusted for changes and uncertainties. This ensures TCPI remains a reliable tool in EVM, helping CAMs manage their control accounts and stakeholder expectations effectively.

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4 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?

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Frank Walker, P. Eng., PMP (#289)
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We have found that you get 80% of the value of EV from SPI. If you keep your project on schedule, it will stay on budget or the budget was hopeless to start with. SPI comes free if you have a properly resource-leveled schedule. CPI is a lot of work and often there are learning curve issues as well. All of our clients use SPI, only our most experienced clients use CPI, and then often at a higher level in the schedule.

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What are the best practices and pitfalls of applying TCPI in EVM?

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1 TCPI formula and meaning

2 Best practices of applying TCPI

3 Pitfalls of applying TCPI

4 Here’s what else to consider

Earned Value Management

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