Practical Project Management

To Complete Performance Index

The To Complete Performance Index (TCPI) is an index that rates the probability of a forecast. It is also known as the CPI to EAC index. This index is used to gain confidence in the reported estimate for the remaining work.

A forecast is probable if the TCPI equals one.
A TCPI of less than one shows an increase in performance that makes the forecast statistically not probable. A TCPI greater than one shows a decrease in performance for the remaining work.

Do I have the necessary staff for this new contract?

Full Time Equivalents (FTE), or equivalent staffing units, are commonly used instead of hours to project staffing requirements.

The number of working hours per month should include a productivity factor to determine accurate staffing requirements.
The productivity factor will be one if 100% of the working hours are billed to a specific project. On the other hand, if 20% of an employee's time is spent on non-billable activities like attending meetings and filling out time cards, only 80% of that person's time is actually spent on the project. In this case, an accurate FTE calculation should include a lower productivity factor.

The productivity factor might be different for various personnel, locations, and times of year.
For example, a person with both resource management and project management responsibilities often spends a certain amount of time performing human resource activities and may, therefore, have a lower productivity rate. In addition, most countries have holidays during certain times of the year, and people are frequently less productive during those times.

Along with productivity factors based on the season and personnel, there are also efficiency factors dependent on past performance that can be applied to the staffing requirement for the remaining work. If the staffing requirements for a project have been overrunning to date, using the baseline plan from the current time to completion implies an expectation that staffing performance will improve.
To countermand this expectation, the CPI expressed in hours or FTEs can be applied to the remaining work to predict a more probable staffing requirement for the remainder of the project.

When analyzing staffing requirements you need to make sure that all activities, including level of effort activities, are considered. You need to provide for different productivity rates per resource and per month in order to determine an accurate staffing requirement based on the hours required to complete a project.
Finally, make sure that your forecasts can be expressed in FTEs to show the projected staffing requirements.

Will labor rate and currency exchange rate fluctuations affect my project's cost?

Rate fluctuations will affect the final project cost.
You need to make sure that your forecast is not using the same rates used when the baseline was created. Your forecasted rates should change with the economy. This will ensure that your final project costs accurately reflect the current environment.

Since cost of living adjustments are difficult to predict, it is helpful to have all rate escalations defined in a single rate set. This way you can define all labor rates as today's rate and change the labor rate escalation for all resources in a single place. This type of rate analysis can also be beneficial when dealing with currency exchange rates.

By using multiple "what-if" scenarios, a good EVM software package can easily and effectively allow you to analyze the effects of all types of challenges presented to today's project managers.
It will allow you to use different sets of rates for each of your forecasts and to calculate foreign currencies as well.
With the ability to report on multiple forecasts simultaneously, you will be able to analyze the effects of expected changes by setting up different forecasts using the various labor rates or exchange rates.

How will funding cuts affect my cash flow?

When analyzing a project, it is important that you are able to compare budget, actual costs, and funding.
Today's competitive market requires that you manage challenges such as funding cuts.
If your funding is reduced, your contract may not allow you to change the baseline; however, you will need to modify your spending. If your contract requires you to earn value based on the original baseline - not the funding - you need to copy the budget and globally factor costs using pricing functions.
The final outcome is the ability to store and report on both the original baseline and the funding. You can then produce reports that show the baseline, the actual costs, and the funding. You are trying to make your actual costs and associated funding curves match.

Figure 5 shows how the actual costs reflect the funding.

What is causing my cost variance?

Many conditions cause cost variances. You need to ask yourself if your project is taking more resources to do the work than you originally planned or if the resources are more expensive than planned. To accomplish this analysis, you compare the earned rate to the actual rate and the budgeted hours to the actual hours.

The derived costs associated with earned value are not calculated using a rate file but by earning the budget hours and associated derived costs. Therefore, the earned value rate and the budgeted rate are most likely the same. However, when you examine variances, you should be analyzing earned versus actual as opposed to budgeted versus actual.

For example, you might earn 100 hours and there are 100 actual hours. If your actual cost is much higher than the earned value, then you have a rate variance as opposed to an efficiency variance. The rate variance is calculated using the following formula:

To calculate an earned rate, the following formula is used:

An actual rate is calculated by looking at the posted quantities:

A positive rate variance indicates that the actual rate is less than the earned rate. Rate variances are compensated for in a forecast by changing the to-go labor rate for your forecast.

If you are given an estimate to complete (ETC), the to-go labor rate is compared with the budgeted rate by calculating the to-go labor rate as follows:

In addition to rate variance, there is an efficiency variance. An example of an efficiency variance is when you budget and earn 100 hours, but there are 120 actual hours. An efficiency variance is compensated for in a forecast by using statistical forecast methods based on previous performance. Multiplying the remaining effort by 1/(CPI*SPI) is a good means of projecting the final cost.

Efficiency variance is calculated as follows:

Any time that a cost variance is incurred during a project, it is important to determine what is causing the variance. Is it a rate variance or an efficiency variance? In addition to simply changing the final project cost, the work being performed should be investigated to see if there are any means of improving the situation. Earned value gives you the early warning you need to solve problems while the work is in progress before the actual costs are above the total budget.