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To-Complete Performance Index (TCPI)

5 minutes 5 Questions

To-Complete Performance Index (TCPI) is a projection of the anticipated performance required to achieve a goal. The TCPI can forecast how much efficiency must be achieved on the remaining work to meet a financial commitment. In essence, this metric tells us the cost performance index (CPI) that we need to hold going forward from this point in time to stay within the budget. It is a vital measure as it allows project managers to understand what future productivity levels must be in order to meet a specific budget or deadline.

Guide on To-Complete Performance Index (TCPI)

The To-Complete Performance Index (TCPI) is a critical concept often covered in courses related to project management or financial analysis.

Importance: TCPI helps managers understand whether achieving the project's budget or cost objectives is feasible based on current project performance. This key metric can guide decision-making and resource allocation.

What it is: TCPI is the ratio of work remaining to the budget remaining. More specifically, it's calculated as the division of 'the cost required to complete the remaining work' by 'the remaining budget'.

How it Works: If TCPI is greater than 1, it indicates that the project needs to perform better than its current performance to meet the budget. If TCPI is less than or equal to 1, it suggests that the current level of performance is sufficient to meet the budget.

Answering Questions: To answer TCPI questions effectively in an exam, make sure to understand the formula, committing it to memory, and practicing example problems. It's also important to understand the interpretation of the TCPI value.
Exam Tips: Be prepared to interpret varying TCPI values and their implications on the project. If given a scenario, try to determine if budget or performance adjustments would be required based on the TCPI.
Finally, remember not to panic if you see a complex problem. Often, these questions rely on breaking down the problem into simpler, manageable components.

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Question 1

In a software implementation project, the actual cost (AC) currently stands at $400,000, the earned value (EV) stands at $380,000, and the planned value (PV) is $375,000. If there is an increase in project budget from $600,000 to $700,000, what will be the new To-Complete Performance Index (TCPI)?

Correct Answer: TCPI = (700,000 - 380,000) / (700,000 - 400,000) = 1.07

The To-Complete Performance Index (TCPI) is calculated using the formula: TCPI = (BAC - EV) / (BAC - AC), where BAC is the Budget at Completion, EV is the Earned Value, and AC is the Actual Cost. In this case, the new BAC is $700,000 (increased from $600,000), EV is $380,000, and AC is $400,000. Plugging these values into the formula: TCPI = (700,000 - 380,000) / (700,000 - 400,000) = 320,000 / 300,000 = 1.07. This result indicates that the project team needs to perform at a 1.07 efficiency rate for the remaining work to stay within the new budget of $700,000.

Question 2

The To-Complete Performance Index (TCPI) is calculated as (BAC - EV) / (BAC - ________)

Correct Answer: AC

The correct answer is 'AC' (Actual Cost). The To-Complete Performance Index (TCPI) is a measure of the cost performance required to complete the remaining work to achieve a specified management goal. The formula for TCPI is: TCPI = (BAC - EV) / (BAC - AC) Where: BAC = Budget at Completion EV = Earned Value AC = Actual Cost This formula calculates the cost performance that must be achieved on the remaining work to meet the Budget at Completion (BAC). The other options are incorrect: 'PV' (Planned Value) is not used in the TCPI formula. It represents the authorized budget assigned to scheduled work. 'CV' (Cost Variance) is the difference between EV and AC, not a component of the TCPI formula. 'SV' (Schedule Variance) is the difference between EV and PV, also not part of the TCPI calculation. TCPI is an important metric in Earned Value Management, helping project managers assess the efficiency required to complete the project within budget constraints.

Question 3

You are overseeing a construction project and the current AC stands at $140,000 and EV is $150,000. Assuming the cost baseline (BAC) is $500,000, how would you compute the To-Complete Performance Index (TCPI)?

Correct Answer: (BAC - EV) / (BAC - AC)

The first answer is correct because it is the actual formula for calculating the To-Complete Performance Index (TCPI). TCPI indicates the cost performance efficiency that must be achieved on the remaining part of the project to meet a goal. The numerator (BAC - EV) stands for the remaining work, and the denominator (BAC - AC) stands for the remaining funds, so the ratio indicates the cost performance that must be maintained to meet the goal. The other answers are wrong because they do not represent the correct formula for TCPI. The second answer wrongly adds the Actual Cost (AC) to the Budget at Completion (BAC) in the numerator. The third answer erroneously places Earned Value (EV) - BAC in the numerator and AC - BAC in the denominator, essentially trying to calculate efficiency based on negative values. The last answer incorrectly places the remaining work (BAC - AC) over the Earned Value (EV), this does not provide a complete picture of the performance needed to complete the project successfully.

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