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The To Complete Performance Index …an expanded view

SECOND EDITION

By Walt Lipke

Member of PMI Oklahoma City Chapter

Oklahoma, USA


Abstract: The To Complete Performance Index (TCPI) from Earned Value Management describes the performance efficiency required to achieve a cost objective. This paper discusses the common use of the index, examining and confirming the underlying basis. Beyond its usual application, the TCPI indicator has a significant role in transforming project performance to effect a project recovery. This virtually unknown aspect is discussed and illustrated. A discussion of the To Complete Schedule Performance Index (TSPI) from Earned Schedule is included to describe the parallelism between cost and schedule analysis.

Earned Value Management (EVM) with its emphasis on describing project performance numerically has provided a scientific method for project management. The application of EVM is a truly significant improvement to the practice, especially when differentiated from the gross estimation and intuitive impulses historically employed for assessing and reporting project status.

For those project managers (PM) and organizations applying EVM, data is available for analysis, thereby facilitating detailed understanding of the cost performance of the project from its beginning through to the present time. The most often used and understood indicator from EVM is the Cost Performance Index (CPI), defined as the ratio of the earned value (EV) accrued divided by the actual cost (AC); i.e., CPI = EV / AC [1]. CPI is a description of the efficiency of achieving the accomplishment with respect to the investment cost made.

A companion cost indicator, the focus of this paper, is the To Complete Performance Index (TCPI). The indicator is defined as the work remaining to be accomplished divided by the amount of unspent funding. The work remaining is calculated from the difference between the total project budget (Budget at Completion or BAC) and the EV accrued, whereas the funds remaining can be assessed in several different ways. For simplicity, the funds remaining is calculated in relation to the total cost desired (TC). Thus, the index is defined as follows: TCPI = (BAC – EV) / (TC – AC) [1]. A common application of TCPI is the computation for when the desired final cost is the project budget. In this instance, TCPI = (BAC – EV) / (BAC – AC).

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.

With this understanding of TCPI, the remainder of the paper will address how the indicator is used in cost analysis and examine the validity of the premise. As will be realized in the discussion, the performance of the TCPI function has some unusual characteristics. The application of TCPI in project recovery is subsequently described revealing intriguing information useful to project managers.

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To read entire paper (click here)

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, in 2009, Issue2: 18-22. 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. Recently, the College of Performance Management awarded Mr. Lipke the Driessnack Distinguished Service Award, their highest honor.

Walt Lipke can be contacted at [email protected]

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