Earned Value Management – TCPI(E) & CPI

The power of Earned Value data lies in the forecast data that can be used to challenge and indicate the likely out turn cost of a project on completion.

TCPI(E) stands for Target Cost Performance Index (Estimate), the value derived from the TCPI(E) formula indicates the level of efficiency from the reporting period to the completion of the project that the project requires to achieve to meet the forecasted Estimate At Completion.

The formula for TCPI(E) is:

TCPI(E) = (Budget At Complete – Budgeted Cost of Work Performed)/(Estimate At Complete – Actual Cost of Work Performed)

It is important to use the TCPI(E) value in conjunction with the trend of the CPI value to assess if the TCPI(E) value is achievable given past performance. If it is considered not to be then the Estimate At Complete (EAC) may require revision.

For example if the CPI has historically trended around 0.65 and the TCPI(E) is indicating that to achieve the EAC there needs to be an increase to 1.28 from this point forward then what is the likelihood of achieving this? If this is not likely then the EAC would need to be revisited.

For further articles on Earned Value Management and other Project Control articles please visit our blog on our website www.myxacom.com where knowledge is no weight to carry.

Earned Value Management – IEAC1 & IEAC2

The power of Earned Value data lies in the forecast data that can be used to challenge and indicate the likely out turn cost of a project on completion.

Two of such indicators are Independent Estimate At Complete 1 and Independent Estimate At Complete 2, more commonly known as IEAC1 and IEAC2.

The IEAC1 formula calculates the IEAC by subtracting the performance to date from the total budgeted value at completion and dividing by the Cost Performance index (CPI). This provides a more optimistic view of the likely out-turn cost than IEAC2.

IEAC1 = Actual Cost of Work Performed + (Budget At Complete – Performance to Data)/Cost Performance Index.

The IEAC2 formula calculates the IEAC by subtracting the performance to date from the total budgeted value at completion and dividing by the Cost Performance index (CPI) multiplied by the Schedule Performance Index (SPI). This provides a more pessimistic view of the likely out-turn cost than IEAC2.

IEAC2 = Actual Cost of Work Performed + (Budget At Complete – Performance to Data)/(Cost Performance Index X Schedule Performance Index).

The IEAC values are typically used to indicate the likely out-turn cost of a project at completion based on performance to date. This can be used to assess and challenge Estimate At Complete values provided by the project teams to help ensure that a realistic out-turn cost is forecasted.

It is important to used IEAC in conjunction with EAC as the IEAC is mathematical outcome and does not take into consideration the potential savings or additional overspends that project team members are aware of.

For further articles on Earned Value Management and other Project Control articles please visit our blog on our website www.myxacom.com where knowledge is no weight to carry.

Earned Value Management – SPI & CPI – The Basics

Earned Value Provides multiple metrics based on past performance to calculate future out-turn positions. This article describes Schedule Performance Index and Cost Performance Index.

SPI – Schedule Performance Index is calculated from the baseline profile and performance achieved to date:

SPI = BCWP (EV)/BCWS (PV) or Performance/Baseline

A value of 1.00 indicates that the work is on track against the baseline or planned work. Below 1.00 would indicate that things are behind schedule and above 1.00 indicates an ahead of schedule position.

It is important to note that the SPI will always return to 1.00 on completion whether late, early or on time. Earned Schedule addresses this effect, for more information visit ‘Can You Tell the Time?’ on the Earned Schedule website.

CPI – Cost Performance Index is calculated from the work performed and the actual cost of that work.

CPI = BCWP (EV)/ACWP (AC) or Performance/Actuals

A value of 1.00 indicates that the spend is in line with the work performed, below 1.00 indicates an overspend and above 1.00 indicates an underspend. In other words for every 1.00 hour or unit of currency spent what is the return?

For example a CPI of 0.50 would indicate only 50% of the initial 1.00 invested has been returned, showing an inefficiency of 50%.

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