lipke thetcpiindicator

8/20/2019 Lipke TheTCPIIndicator

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The To Complete

er ormance n ex…

performance TCPI vs CPIWalt Lipke

PMI - Oklahoma City Chapter

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TCPI CPI Threshold

+1 405 364 [email protected]

www.earnedschedule.com

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Fraction Complete


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The To Complete Performance Index (TCPI)from Earned Value Management describes theperformance efficiency required to achieve acost objective.

Beyond its usual application, the TCPI indicator

performance to effect a project recovery. Thisvirtually unknown aspect is the focus of this

KPM 2009 - TulsaCopyright © Lipke 20092


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Introduction

Evaluation of EAC

Application to Project Recovery

Evaluating the Recovery Strategy Schedule Analysis

Summary & Conclusions



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EVM provides a method of describing projectperformance numerically …a significant

status

The most often used and best understoodindicator from EVM is the Cost PerformanceIndex, CPI = EV / AC

achieving the accomplishment with respect tothe cost investment made



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Whereas CPI describes the past, TCPI providesinformation about the future

TCPI is defined as the work remainin to be accomplished divided by the amount of unspent

funding where TC = Target Cost or Desired Cost Outcome

What does TCPI tell us?

The index value describes the costperformance efficiency required for theremainder of the project to achieve the desired


final cost


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Traditionally, TCPI is used by customers oroversight organizations to assess thereasonableness of an estimated final cost orEstimate at Completion (EAC)

For this application,

The customer evaluates the EAC provided bythe PM from the value of the TCPI computed



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TCPI Value Predicted Outcome

≤ . c eva e

> 1.10 Not Achievable



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When TCPI is equal to or less than 1.00, thereis confidence that the EAC can be achieved

,than 1.10 the project is considered to be “out of

control;” the EAC is very likely unachievable Between the two declarative values, 1.00 and

1.10, the PM’s actions become ever more.

intervention to improve cost performance veryprobably will be required to achieve the EAC



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TCPI CPI Threshold

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x

TCPIExceed Threshold @ 0.35

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CPI = 0.850

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The planned final cost (BAC) will not beachieved if this performance, CPI = 0.850,

TCPI continually increases as the project

progresses, exceeding the threshold value of1.10 at fraction complete of approximately 0.35

The rate of TCPI increase becomes ever larger.



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What is the evidence that when TCPI>

1.10,the project is irrecoverable?

,empirical or theoretical studies to validate the

claim. In the next few slides, we’ll look at the behavior

of TCPI in more detail …and state my opinion



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A revealing view can be obtained using calculus…from TCPI in a different form:- – –

where CR (Cost Ratio) = TC / BAC

EV% = EV / BAC

For notation simplicity:

y = TCPI, x = EV%, a = CR, b = CPI-1

The equation to examine becomes:y = (1 – x)/(a – bx)



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As an example, let us analyze a project havingcost performance which will not achieve the-1 = = . , .

The point of interest is when TCPI equals the

threshold value (1.10)x = (ya – 1)/(yb -1)

= ((1.1 ∗ 1.1) – 1)/((1.1 ∗ 1.2) -1)

= .



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What is the rate of increase of TCPI at the

threshold value (1.10)?

complete can be examined using the first

calculus derivative: dy/dx = (b – a)/(a – bx)2

At the point of interest (TCPI = 1.10), thederivative can be evaluated:

. – . . – . .= (0.1)/(1.1 – 0.7875)2

=


.


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What happens to the rate of increase of TCPI

when performance continues and fraction

dy/dxEV%

1.0240.656

2.5000.750

1.4790.700



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For modest increases in EV%, it is seen fromthe numbers in the table that dy/dx (i.e. theTCPI rate) has larger and larger rates ofchange

Once the threshold is exceeded, there is little

positive impact …the project is very rapidlybecoming “out of control”

, .appears to be a reasonable criterion for makingthe assertion that the EAC put forth by the PM



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Application to ProjectRecovery

PMs applying EVM possess early warning tools Forecast of final cost, IEAC = BAC / CPI

’ ,the following data: CPI = 0.850, BAC = $1000,

MR = $100 What is projected for the future?

If CPI does not improve, BAC will be exceeded

= = .

MR will be consumed, IEAC > TAB

The project is headed for a budget overrun



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What is the PM’s prerogative when the project

is 80 percent complete?

final cost and graphing it as shown previously,

the answer is readily seen As observed in the next slide, the value of TCPI

is so large it is nearly off the chart; the.

KPM 2009 - TulsaCopyright©

Lipke 200918


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vs

TCPI CPI Threshold

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1.2

1.3TCPI = 1.259

@0.80

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I n d e

CPI = 0.850

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0.0 0.2 0.4 0.6 0.8 1.0


Lipke 200919


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From our previous discussion, the PM knowsthat when TCPI ≥ 1.10 the project is regarded

very likely needed

In this instance, as uncomfortable as it may be,negotiation with the customer cannot beavoided

project is 30 percent complete?


Lipke 200920


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The simple answer is “No”

At 30 percent complete, TCPI = 0.937, a good,

current performance does not improve the

project will overrun the funding available (TAB) However, with this value for TCPI, the PM has

an opportunity to take action thereby avoiding…

impending negotiation if the present cost

performance continues


Lipke 200921


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What is the period of opportunity for the PM to

make a positive performance change?

TCPI exceeds 1.10 to recover the project

Is the period of opportunity sufficient forrecovery to be successful?

For our example, let’s look at the graph …


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vs

TCPI CPI Threshold

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1.2

1.3TCPI = 0.937

@ 0.30

TCPI > 1.10@ 0.72

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0.0 0.2 0.4 0.6 0.8 1.0

.


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For a project of reasonable size, having morethan 40 percent of the period of performance to

,has a very good chance for being successful

with the recovery action


Lipke 200924


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Evaluating the RecoveryStrategy

The TCPI has application, as well, in creating aviable recovery strategy …a trade-off between

commitments to the customer (TAB &

negotiated product delivery date) To resolve the condition of unsatisfactory cost

performance, the PM creates a plan fortransformin the cost erformance from the

present value of CPIa (actual value) to animproved efficiency, CPIs (strategy value)



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Evaluating the RecoveryStrategy

TCPI plays a role in evaluating whether the

change desired can realistically be achieved.For this purpose, the following formula for TCPIis used:

TCPI = (1 – EV%) / (CPIs-1 – CPIa-1 ∗ EV%)

,change has a good likelihood of beingachievable when the calculated value for TCPI

. … whether there is sufficient opportunity for theimprovement to succeed



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The To Complete Schedule Performance Index

(TSPI) facilitates analysis similar to the TCPI TSPI is e ual to the lanned duration for the

work remaining divided by the durationavailable:

where PD is the planned duration

ES is the Earned Schedule

…generally: PD, the negotiated duration (ND), orestimated duration (ED)


computation


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The use of TSPI is available for schedule

management and control in a parallel manner tocost and TCPI

Is the project schedule recoverable?

What is the period of opportunity for the PM to

Is the period of opportunity sufficient forschedule recovery to be successful?

Both TCPI & TSPI are needed to havecomplete capability for the cost–scheduleperformance trade-off necessary for project


recovery


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TCPI is definitely more than the simplecalculation for determining the performance rate

TCPI has application in evaluating the realism

of the bottom up derived EAC …it was shownthat the value of 1.10 is a reasonable criterionfor determining when a project is notrecoverable and is “out of control”



30/31

Use of TCPI was extended to the evaluation of

the opportunity and the performancetransformation envisioned for project recovery TCPI may also be used in creating the tactical

changes of personnel and overtime adjustments

Throu h Earned Schedule the methodsdescribed for TCPI are made applicable toschedule analysis, as well

his/her efforts for controlling and managing theproject



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“The To Complete Performance Index …an expanded view,”

The Measurable News, 2009 Issue 2: 18-22 [W. Lipke] “Project Recovery …It Can Be Done,” CrossTalk, January

: - . p e

Practice Standard for Earned Value Management. NewtownSquare, PA: Project Management Institute 2005.

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