PMP Formula of the Week: Forecasting a Necessary CPI

Cisco, Cloudera, Featured, Professional Development, Project Management, Routing & Switching, Technology, Training in Business

PMPFormulaOTW475166460Special Question of the Week provided by author Bill Scott.

The concept for “earned value” has been around for at least 115 years, maybe longer. It was used in the apparel industry in New York City in the early 1900s, by DOD in the early 1960s for project control and finally by the Project Management Institute (PMI) in 1987 in A Guide to the Project Management Body of Knowledge, (PMBOK® Guide). But a recently publicized feature has been added to the tools chest for forecasting cost. While not well practiced yet, it is interesting. The new tool is To Complete Performances Index (TCPI); currently only used as a “to complete cost performance index.” This infers an acronym of TCCPI instead of TCPI. Nothing in the logic or deviation of the equation precludes the concept from being used for schedule as well. This might be TCSPI. But that is the subject of another PMP Question of the Week.

The best way to understand how TCPI works is by a describing a project scenario:

Your project has not been performing well from the beginning from a budget standpoint. The project BAC is $1,000,000 and it is 50 percent complete from an Earned Value (EV) standpoint. The Cost Performance Index (CPI) is calculated to be 0.8. Your project sponsor wants to know what CPI the project must perform at for the last 50 percent of the project for the project to come in at budget.

The answer, of course, is 1.2. The numbers used in this scenario allow the answer to be logically estimated. A CPI of 0.8 for the first half of the project and a CPI of 1.2 for the second half of the project averages out at a CPI of 1.0. But, what if the project data were not so rounded? The new project data is 46 percent of the work is complete, and CPI is 0.78 The project work is expected to continue, from a cost standpoint, to the project end similar to the first 46 percent What CPI must the project perform at over the last 54 percent of the work for the project to come in at budget?

A. 21
B. 72
C. 88
D. 32

Related Resources
PMP Exam Prep Mobile App
Project Management White Papers
Related Courses
IT Project Management
Project Management Fundamentals
Project Management, Leadership, and Communication
PMP Exam Prep Boot Camp

PMP Formula of the Week Series

  • PMP Formula of the Week: Forecasting a Necessary CPI
Please support our Sponsors here :