If you are not familiar with Cricket, the most intellectual outdoor sport, skip the Cricket match example and read the remainder of the post.
Cricket Match Example
Let's take an example of a 50 over One-Day game between India and Australia. Assume that Australia batted first and scored 299 runs in 50 overs. So, India needs to score 300 runs in 50 overs. What's the required run rate for India? It's exactly 6 runs per over (rpo) at the start of India's innings.
Now say after 30 overs, India managed to score only 120 runs. So, the current run-rate is 4 rpo. What's the required run-rate after 30 overs?
Required Run-Rate = Runs remaining to be scored / Overs remaining
=> (Total Runs to score - Runs already scored) / (Total Overs - Overs used)
=> (300 - 120) / (50 - 30)
=> 180 / 20
=> 9 rpo
So, India is going at 4 rpo, but needs to score at 9 rpo for the remaining 20 overs to win the game.
Now apply this analogy to Project Management.
Current Run-Rate ~ Cost Performance Index (CPI)
Required Run-Rate ~ To-Complete Performance Index (TCPI)
To-Complete Performance Index (TCPI)
To-Complete Performance Index (TCPI) is calculated by dividing the work remaining on the project by the money remaining. There are 2 different formulas to calculate TCPI. We'll review both. Suppose your total project budget (Budget At Completion or BAC) is $300. Three days into your project, you spent $180 (Actual Cost or AC) on work that was estimated to cost only $120 (Earned Value or EV).
Therefore, CPI = EV / AC = 120 / 180 = 0.66
CASE 1: You need to complete the project within the original budget. In this case, the TCPI formula is:
TCPI = Work Remaining / Money Remaining = (BAC - EV) / (BAC - AC)
The worth of remaining work = $300 - $120 = $180
And, the money remaining = $300 - $180 = $120
TCPI = (BAC - EV) / (BAC - AC)
=> ($300 - $120) / ($300 - $180)
=> $180 / $120
Conclusion: You are going at a CPI of 0.66, but you need to go at a CPI of 1.5 for the remaining work on your project, in order to meet your original cost estimate.
CASE 2: You (as a Project Manager) realize that the original estimate was fundamentally flawed and/or it is not feasible to meet the original cost estimate. You develop a new cost estimate for the remaining work and get it approved. With the new estimate, your revised project budget (EAC) is $450. In this case, the TCPI formula is:
TCPI = Work Remaining / Money Remaining = (BAC - EV) / (EAC - AC)
=> ($300 - $120) / ($450 - $180)
=> $180 / $270
Conclusion: You can continue to go at your current CPI of 0.66 and complete the remaining work on the project and still meet the revised cost estimate.
Just in case you were wondering about the result of India-Australia game, of course India won, and with an over to spare !
Image Credit: Wikimedia Commons