Which of the following is an index that is used to calculate the estimate to completion?

• To Complete Performance Index (TCPI)

  The to complete performance index (TCPI) is a comparative EVM metric used primarily to determine if an independent Estimate at Completion (EAC) is reasonable. It computes the future required cost efficiency needed to achieve a target EAC . The TCPI is computed by dividing Budgeted Cost of Work Remaining (BCWR) , which is represented by subtracting the cumulative Budgeted Cost for Work Performed (BCWP) from the Budget at Completion (BAC), by the target cost remaining, which is represented by subtracting the cumulative Actual Cost of Work Performed (ACWP) from the target value. (The "target" used in the denominator could be the BAC, the contractor EAC or a government calculated EAC.)

  TCPI target = (BAC - BCWPcum)/('target' value - ACWPcum)

  The TCPI is compared to the cumulative Cost Performance Index (CPI) , the cost efficiency the contractor has achieved, to determine if a target value is reasonable. A target value is assumed to be reasonable, if the TCPI is within plus or minus 0.05 of the cumulative CPI EVM metric. (Some industry system descriptions allow a 0.10 margin.) If a TCPI is more than 0.05 higher than the cumulative CPI the target EAC may be overly optimistic. If the cum CPI is more than 0.05 higher than the TCPI , the target EAC may be overly conservative.

  Given a TCPI of 1.1, the plain language definition is: the contractor needs to perform at a cost efficiency of 110% from now to the end of the contract to achieve the target EAC ; likewise a TCPI of 0.95 would be: the contractor needs to perform at a cost efficiency of 95% from now to the end of the contract to achieve the target EAC . In order to make TCPI meaningful, it needs to be compared with the CPI which is the efficiency the contractor has actually demonstrated to determine if the TCPI is achievable.

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Although a project budget may be defined, actual project progress may cause a deviation from the pre-determined budget at completion (BAC). Throughout the project, it will be important to provide forecasts as to the amount of money that will actually be spent.

There are forecasts that are used: estimate at completion (EAC) and estimate to complete (ETC).

Estimate at Completion (EAC)

Estimate at completion is the forecasted cost of the project, as the project progresses. There are a number of different ways to determine the EAC.

The most common way to determine EAC is a “bottoms-up” formula where the actual costs (AC) are added to the forecasted remaining spending – the estimate to complete (ETC).

EAC = actual costs (AC) + estimate to complete (ETC)

If the project has encountered a one-time (atypical) variance, the following formula may be used:

EAC = actual costs (AC) + budget at completion (BAC) – earned value (EV)

If the project has encountered a variance that is expected to recur and continue to affect the project (typical), the following formula may be used:

EAC = budget at completion (BAC) ÷ cost performance index (CPI)

Estimate to Complete (ETC)

Estimate to complete (ETC) is a forecast of how much more money will need to be spent to complete the project.

ETC can either be determined by building a bottom-up estimate, usually by asking your work package owners, team members, or vendors for revised estimates or by deducting the actual costs (AC) from the estimate at completion (EAC).

ETC = new estimates

ETC = estimate at completion (EAC) – actual costs (AC)

Example

You are three months into the five month bathroom remodeling project. The original budget (BAC) was $1,500 and you have completed approximately 40% of the work. You currently are running over-budget, as indicated by a cost performance index (CPI) of 0.67. Actual costs to-date have been $900.

If you learn that the contractor found some mold in the sheetrock and needed to replace it, causing a one-time variance, you could use the atypical formula to forecast the EAC and the ETC:

EAC = AC + BAC – EV = $900 + $1,500 - $600 = $1,800 (how much we will spend at the end of the project)

ETC = EAC – AC = $1,800 - $900 = $900 (how much more we will spend from this point forward)

If, however, you learn that the workers that are being used are actually much more expensive than you originally estimated, this would be a typical variance as it’s going to continue to affect the project.

EAC = BAC ÷ CPI = $1,500 ÷ 0.67 = $2,239

ETC = EAC – AC = $2,239 - $900 = $1,339

Notice that for the “typical” scenario, the EAC and ETC forecasts are much higher than the “atypical” results. This is due to the fact that the variance is going to continue to affect the project.

Of course, the other option to forecast your project costs would be to simply ask your team / vendors for a new estimate to complete the remaining work. This ETC would then be added to the actual costs (the money already spent) to determine the EAC.

EAC = ETC + AC

Summary

As the project progresses, it will be necessary to forecast out the total anticipated funding required.
The two forecasts utilized are the estimate at completion (EAC) – how much the project is forecasted to cost overall – and the estimate to complete (ETC) – how much funding is required to complete the remaining work.

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Which index is a measure of how much of the total project work has been completed?

Which of the following indices is calculated by dividing the remaining work by the remaining budget?

What is the estimate that provides an estimate of how much money will be needed to complete the project called?

Is actually an estimate of project completeness and is included as an estimate rather than with the previous efficiency indexes?