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PMP lesson · Cost & EVM · Cost: estimating, budget and earned value · lesson 5 of 5 · about 7 minutes

TCPI and reading performance reports

Predictive · also used in hybrid reportingFree preview
Goal: After this lesson you can tell the sponsor whether a budget target is realistic, and avoid the three most common mistakes when reading earned value reports.

1The situation

“Just finish on budget”

Robot cell, week 5: BAC $100,000, EV $40,000, AC $60,000, CPI 0.67.

The sponsor says: “I don't want a new forecast. The budget is $100,000. Just finish on budget.”

Is that possible? You have $40,000 of money left ($100k − $60k) and $60,000 of work left ($100k − $40k). So every remaining dollar must produce $1.50 of work. Your team has been producing only 67¢ per dollar. The number that measures this is the TCPI.

2TCPI: the efficiency you will need

The to-complete performance index compares the work left with the money left.

To finish on the original budget
TCPI = (BAC − EV) ÷ (BAC − AC)
Work left ÷ money left. Robot cell: 60,000 ÷ 40,000 = 1.50.
To finish on a new, approved EAC
TCPI = (BAC − EV) ÷ (EAC − AC)
Use this when the sponsor has approved a new forecast. With EAC $150k: 60,000 ÷ 90,000 = 0.67.
TCPI works the opposite way to CPI: TCPI above 1 = harder (you must work better than budgeted). Compare it with the CPI achieved so far.

3See it in one picture

0.50.751.01.251.51.75 1.0 = exactly as budgeted CPI so far 0.67 TCPI needed 1.50 The team would need to become more than twice as efficient
The red marker shows the efficiency achieved so far. The black marker shows the efficiency needed to finish on budget. The distance between them shows how realistic the target is.

4How it looks on the exam

Exam-style question 1. A project has a budget at completion of $800,000, an earned value of $300,000 and an actual cost of $400,000. The sponsor insists that the project must finish within the original budget. Cost performance has been stable. What should the project manager do?
A. Assure the sponsor that the budget can be met by improving efficiency
B. Explain that a TCPI of 1.25 would be required against a CPI of 0.75, present a realistic forecast and options, and let the sponsor decide
C. Reduce the remaining scope so that the budget is met, and report it afterwards
D. Move management reserve into the cost baseline to cover the overrun
Show the answer and the decode
Answer: B.
In simple English
The project is over budget, and the sponsor wants it to finish on the original budget anyway.
What is the question really asking?
The honest, correct response.
Key words / trigger
“must finish within the original budget”
PMP logic
TCPI = (800 − 300) ÷ (800 − 400) = 1.25. CPI = 300 ÷ 400 = 0.75. A jump from 0.75 to 1.25 is unrealistic, so the PM informs the sponsor and presents options.
Why the wrong answer looks attractive
Promising improvement pleases the sponsor now, but the numbers show it is very unlikely.

5Remember this

Your memory card

  • TCPI = work left ÷ money left = (BAC − EV) ÷ (BAC − AC)
  • TCPI above 1 = harder; compare it with CPI to judge if a target is realistic
  • Look at trends, not only cumulative values
  • SPI → 1.0 at the end of every project: check real dates and the critical path
The full lesson in the PMCLEAR app also has:
  • the rest of the lesson (Is the target realistic?, Three traps when reading reports)
  • a worked example
  • the common traps (wrong vs right)
  • 2 exam-style questions with the decode
  • a 3-question quick check
  • an interactive calculator
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