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Examination of the Threshold for the To Complete Indexes

SECOND EDITION

By Walt Lipke

Oklahoma, USA

 


 

Abstract

From time to time in the Earned Value Management literature a claim is made that exceeding the To Complete Performance Index (TCPI) value of 1.10 spells doom for the project. That is, when the threshold value of 1.10 is exceeded, the project is out of control and the project manager has little chance of successfully recovering to the desired project cost. An article from a few years ago examined the threshold theoretically, concluding that it appears to have validity. As well, the same article extended its assessment to the comparable Earned Schedule indicator, the To Complete Schedule Performance Index (TSPI). This paper examines the threshold value empirically for both TCPI and TSPI, using real data from 25 projects of differing type and varying sources.

Introduction

In the application of Earned Value Management (EVM), the To Complete Performance Index (TCPI) is an important cost performance indicator for project managers (PM) [Fleming, et al, 2009]. What does TCPI tell us? The index value describes the cost performance efficiency required for the remainder of the project to achieve the desired final cost. The value of TCPI can have a very powerful influence on how a PM views the need or urgency for intervention and management action.

The indicator is defined as the work remaining to be accomplished divided by the amount of unspent funding [Project Management Institute, 2011]. The indicator is incredibly useful in that it can be evaluated using cost values different from the Budget at Completion. For simplicity in defining the mathematical formula, this “different” cost is termed the total cost desired (TC). Thus, the index formula is defined as follows:

TCPI = (BAC – EV) / (TC – AC)

where           BAC = Budget at Completion

EV = Earned Value

TC = Total Cost

AC = Actual Cost

Historically, the TCPI value of 1.10 is regarded as a threshold to avoid exceeding if at all possible. Although empirical evidence has not been established, it is believed to be the point at which project performance is out of control; i.e., the probability of recovering to the desired total cost is extremely low.

With the development of Earned Schedule (ES), a comparable indicator has been created for schedule performance management, the To Complete Schedule Performance Index (TSPI). The index value yields the schedule performance efficiency required for the remainder of the project to achieve the desired project duration. The TSPI indicator is defined in the time domain, similarly to TCPI. TSPI is equal to the portion of the planned duration remaining completion divided by the time duration available [PMI, 2011]:

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Editor’s note: Second Editions are previously published papers that have continued relevance in today’s project management world, or which were originally published in conference proceedings or in a language other than English. Original publication acknowledged; authors retain copyright. This paper was originally published in The Measurable News, the newsletter of the College of Performance Management. It is republished here with the author’s permission.

 


 

About the Author

Walt-LipkeWalt Lipke

Oklahoma, USA

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Walt Lipke retired in 2005 as deputy chief of the Software Division at Tinker Air Force Base in the United States. He has over 35 years of experience in the development, maintenance, and management of software for automated testing of avionics. During his tenure, the division achieved several software process improvement milestones, including the coveted SEI/IEEE award for Software Process Achievement. Mr. Lipke has published several articles and presented at conferences, internationally, on the benefits of software process improvement and the application of earned value management and statistical methods to software projects. He is the creator of the technique Earned Schedule, which extracts schedule information from earned value data.

Mr. Lipke is a graduate of the USA DoD course for Program Managers. He is a professional engineer with a master’s degree in physics, and is a member of the physics honor society, Sigma Pi Sigma (SPS). Lipke achieved distinguished academic honors with the selection to Phi Kappa Phi (FKF). During 2007 Mr. Lipke received the PMI Metrics Specific Interest Group Scholar Award. Also in 2007, he received the PMI Eric Jenett Award for Project Management Excellence. The award honored his leadership role and contribution to project management resulting from his creation of the Earned Schedule method. At the 2013 EVM Europe Conference, he received an award in recognition of the creation of Earned Schedule and its influence on project management, EVM, as well as schedule performance research. The College of Performance Management awarded Mr. Lipke the Driessnack Distinguished Service Award, their highest honor, in 2014.

Walt Lipke can be contacted at [email protected]

To view other works by Walt Lipke, visit his author showcase in the PM World Library at http://pmworldlibrary.net/authors/walt-lipke/