PMP Question of the Week: Forecasting a Necessary CPI Based on an ETC

The correct answer is C.

This is where the sister version of the TCPI formula comes into play, as:

TCPI =  [BAC – EV]    =  Value of remaining work
.              [EAC – AC]         The remaining funds

BAC = Budget at Completion
EV = Earned Value, $460,000 as previous
AC = Actual Cost, $589,744 as previous
EAC = estimate at completion
EAC = AC + ETC = $589,744 + $652,000 = $1,241,744

TCPI = [$1,000,000 — $460,000]   = $540,000   = 0.83
.              [$1,241,744 — $589,744]       $652,000

One might expect the answer to be a TCPI to be 1.0. While that answer might be intuitive, it is not correct. If TCPI was 1.0 that would mean the value of the remaining work also had to change and be equal to the remaining funds. That’s the only way the formula would work. We know this to be false.

What the TCPI actually means is: the CPI for the last 54 percent of the value of the project work ($540K) has to average 0.83 in order for the project cost to end at no more than $1,241,744 (with a ETC of $652,000). This is a 6.4 percent improvement over the 0.78 previous CPI. While, we may not like the 0.83 CPI and the 6.4 percent improvement numbers, it is probably as good as it gets for a project in as much trouble as this one.

Remember value, cost and funds are very different words. The value of the remaining work never changes. The estimate cost of the remaining work can and does change. The dollars available to pay for the remaining work can also change. The TCPI formula recognizes this difference. That’s why it works as it does.

More on TCSPI in the future.