What are the advantages and disadvantages of using TCPI over other EVM metrics?
If you are a project manager, you probably know that Earned Value Management (EVM) is a powerful tool to measure and control your project performance. EVM uses various metrics to compare the actual work done, the planned work, and the value of the work, such as Schedule Variance (SV), Cost Variance (CV), Schedule Performance Index (SPI), and Cost Performance Index (CPI). But have you heard of TCPI, or To Complete Performance Index? TCPI is another EVM metric that tells you how efficiently you need to perform the remaining work to meet your budget or scope goals. In this article, we will explore the advantages and disadvantages of using TCPI over other EVM metrics.
TCPI is the ratio of the remaining work to the remaining budget or scope. It indicates how much value you need to earn for every unit of cost or work you spend to complete the project. There are two ways to calculate TCPI, depending on whether you use the Budget at Completion (BAC) or the Estimate at Completion (EAC) as your target. The first formula, TCPI based on BAC, is calculated by subtracting Earned Value from BAC and then dividing by BAC minus Actual Cost. The second formula, TCPI based on EAC, is calculated by subtracting Earned Value from BAC and then dividing by EAC minus Actual Cost. This difference in formulas takes into consideration the current cost performance and adjusts the budget accordingly.
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Typically budgets are not adjusted since there may be constraints such as contract values. It is the forecast that should be analyzed and updated if needed. Since most programs quickly have variances, and the emphasis is on the ability of the program being able to meet their EAC, the TCPI based on budget is not as commonly used as the one based on the EAC. To simplify the TCPI eac, it is the Budgeted Cost of Work Remaining (BCWR) divided by the Estimate to Complete (ETC), or BCWR/ETC.
TCPI has several advantages over other EVM metrics, such as being a forward-looking metric that focuses on the future performance. It is also universal, simple, and easy to communicate to stakeholders and team members. Furthermore, TCPI is a flexible metric that can be used to monitor both the cost and scope performance of the project. You can use it to check if you are on track with your original or revised budget, as well as compare the planned and actual scope of the project. This helps to adjust plans and actions to achieve desired outcomes, set realistic expectations, and motivate the project team.
TCPI is not a perfect metric, and it has several limitations and drawbacks. It assumes a linear relationship between cost and value, which may not be the case in reality due to external factors such as risks, uncertainties, and changes. Additionally, TCPI is a static metric that does not account for the dynamic nature of the project, such as scope, schedule, quality, or resources. It also needs to be recalculated and updated frequently to maintain accuracy and relevance. Furthermore, TCPI is a relative metric that depends on the accuracy and reliability of other EVM metrics. If these metrics are not calculated correctly or consistently, TCPI may be misleading or inaccurate. Moreover, the choice of target (BAC or EAC) may have different implications and assumptions which can affect TCPI.
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When evaluating TCPI, it is generally compared to a cost account's CPI to determine whether future performance prediction is realistic based on past performance. As this section notes, this comparison needs to be evaluated based on complexity of past and future work to determine if they can be compared. Typically our justification for a higher TCPI than the historical CPI (CPI=0.92, TCPI=1.0 for example) is that 1) we have learned from previous work so we can be more efficient, 2) risk that was not accounted for in previous work has been mitigated in future work or 3) the complexity of future work is lower so the team can use lower cost resources than previous work to compete the task (when calculating in dollars, not hours).
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TCPI is one of the independent metrics we use to assess execution progress. TCPI, IEAC and more core EV measures pacing a picture around dimensions of project that provide calculated assessment without human bias. These indicators as well as those around schedule events( % start on time, % on time for hierarchy of events, etc) can provide level of confidence around EAC
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