HKSM

A forecasting measure in earned value management that shows the cost efficiency needed on the remaining work to meet a budget target. It compares remaining work to remaining funds and is often referred to as the to-complete performance index (TCPI).

Key Points

• Also called the to-complete performance index (TCPI); it focuses on future cost efficiency.
• Calculated as remaining work divided by remaining funds against a chosen target (BAC or EAC).
• Use BAC when aiming to meet the original budget; use EAC when a new forecast is the agreed target.
• Interpretation: greater than 1.0 means tougher to achieve, equal to 1.0 means on-plan, less than 1.0 means favorable.
• Compare the required efficiency to current CPI to judge feasibility and need for corrective action.
• Based on the same status date and consistent EV data to avoid misleading results.

Purpose of Analysis

• Assess how efficiently the team must perform on remaining work to hit a cost target.
• Support decisions on corrective actions, replanning, or accepting a revised forecast.
• Communicate whether the current performance trend is sufficient to meet objectives.

Method Steps

• Confirm the status date and ensure EV data is current and consistent.
• Gather BAC, EV, AC, and the latest approved EAC if applicable.
• Choose the target: original budget at completion (BAC) or revised estimate at completion (EAC).
• Compute: for BAC target, (BAC − EV) ÷ (BAC − AC); for EAC target, (BAC − EV) ÷ (EAC − AC).
• Compare the result to current CPI and evaluate realism based on team capacity and constraints.
• Decide actions such as cost controls, scope trade-offs, resource changes, or accepting a new EAC.

Inputs Needed

• BAC - Budget at Completion.
• EV - Earned Value as of the status date.
• AC - Actual Cost as of the status date.
• EAC - Estimate at Completion, if using a revised target.
• Status date and any approved changes affecting scope or budget.

Outputs Produced

• The required cost efficiency index to meet BAC or EAC.
• Feasibility assessment when compared to current CPI and trends.
• Recommended corrective or preventive actions.
• Updated forecasts or management communications, as needed.

Interpretation Tips

• Greater than 1.0 means the team must perform more efficiently than the average cost performance to date.
• Less than 1.0 means the target is easier than current performance and has some buffer.
• If the required index is significantly higher than historical CPI, consider revising scope, resources, or accepting a new EAC.
• Use BAC when management insists on the original budget; use EAC when a realistic, approved forecast replaces BAC.
• Do not interpret in isolation; review CPI, SPI, risks, and funding constraints.

Example

• Given: BAC = 1,000, EV = 400, AC = 500.
• To meet BAC: TCPI = (BAC − EV) ÷ (BAC − AC) = (1,000 − 400) ÷ (1,000 − 500) = 600 ÷ 500 = 1.20.
• If EAC = 1,100, to meet EAC: TCPI = (1,000 − 400) ÷ (1,100 − 500) = 600 ÷ 600 = 1.00.
• Interpretation: Hitting the original BAC needs a 1.20 efficiency going forward, which may be challenging; meeting the approved EAC needs 1.00, which is more realistic.

Pitfalls

• Using the wrong target baseline (mixing BAC and EAC) for the calculation.
• Comparing TCPI to CPI from a different status date or with inconsistent EV data.
• Assuming a high TCPI is achievable without checking capacity, constraints, or risks.
• Ignoring the need to update EAC when repeated high TCPI values are unrealistic.
• Focusing only on the index and overlooking schedule or scope drivers of cost.

PMP Example Question

A project has BAC = 900, EV = 360, AC = 450, and an approved EAC of 1,000. What does the complete performance index to meet the approved EAC indicate?

1. TCPI = 1.20, performance must improve significantly.
2. TCPI = 0.90, performance can be slightly lower than current.
3. TCPI = 1.00, performance must match plan going forward.
4. TCPI = 0.80, substantial buffer exists for remaining work.

Correct Answer: C - TCPI = 1.00, performance must match plan going forward.

Explanation: For EAC target: (BAC − EV) ÷ (EAC − AC) = (900 − 360) ÷ (1,000 − 450) = 540 ÷ 550 ≈ 0.98, effectively 1.00. The team needs on-plan cost efficiency for the remaining work.