The To-Complete Performance Index (TCPI) estimates the cost performance necessary in order for the project to meet the original project’s budget goal (Budget At Completion (BAC)) or the new estimate of how much the project will cost (Estimate At Completion (EAC)). This is accomplished by calculating how much work is remaining on the project divided by how much money is remaining for the project. Work remaining is calculated as the BAC minus the Earned Value (EV). Remaining money is calculated as either the BAC or EAC minus the Actual Cost (AC). If using BAC, the formula for TCPI = (BAC – EV ) / (BAC – AC). If using EAC rather than BAC, TCPI = (BAC – EV ) / (EAC – AC).
For example, Carl and his siblings are working on restoring a car. The BAC is $500, but they clearly are going to spend more, so they calculated an EAC of $2050 using the bottom-up method to replace the BAC. So far they have spent $450, which is the AC. Of all the work that the car needs done, they believe that they have 80% of it completed at this point. Since the work is 80% complete, and 80% of the BAC is $400, the EV, the value of the work completed, is $400.
EAC has been calculated to replace BAC, so the TCPI formula using EAC will be used, which is TCPI = (BAC – EV ) / (EAC – AC). Placing our values into the formula, TCPI = ($500 – $400) / ($2050 – $450) = $100 / $1600 = .0625. So the project’s cumulative Cost Performance Index (CPI) must not fall below .0625, or it must immediately improve in order to meet the cost goal. CPI is calculated by EV/ AC = $400/$450 = 0.89.
Also see the earlier postings of: Earned Value Management – Step 1 (February 26, 2009), Earned Value Management AC and BAC – Step 2 (March 2, 2009), Earned Value Management – CPI and SPI (posted August 20, 2009), Estimate at Completion – Bottom-Up Method (posted August 21, 2009).
TAPUniversity 
fahadusmani
May 15, 2012
Good Explanation.