HKSM

A forward-looking cost efficiency metric that indicates the performance needed on the remaining work to meet a selected cost target (BAC or EAC). It helps determine achievability and guides corrective actions during cost control.

Key Points

• Shows the required cost efficiency for the remaining work to hit a chosen cost target.
• Two variants: TCPI(BAC) = (BAC - EV) / (BAC - AC), and TCPI(EAC) = (BAC - EV) / (EAC - AC).
• Compare TCPI to current CPI: TCPI > 1.0 means tougher-than-planned efficiency is needed; TCPI < 1.0 means the target is more attainable.
• Use at project, control account, or work package level to focus interventions where they matter.
• Drives decisions on cost containment, reforecasting (EAC/ETC), and whether to rebaseline.

Purpose of Analysis

• Assess if the current cost target is realistic given actual performance to date.
• Quantify how aggressively the team must perform to recover or maintain cost objectives.
• Support decisions on corrective actions, funding requests, and stakeholder expectations.

Method Steps

• Select the cost target: original BAC or a revised EAC if management has set a new goal.
• Gather up-to-date EV and AC at the desired reporting level and period.
• Calculate TCPI using the appropriate formula for the chosen target.
• Compare TCPI to the current CPI and team capability to judge achievability.
• Identify actions: reduce scope, increase productivity, adjust resources, negotiate rates, or revise the forecast.
• Recommend a path: keep BAC, adopt a new EAC, or rebaseline; document rationale.
• Monitor TCPI and CPI trends each cycle and update forecasts and reports.

Inputs Needed

• BAC (Budget at Completion) for the relevant scope.
• EV (Earned Value) to date for the same scope and time frame.
• AC (Actual Cost) to date aligned with EV.
• EAC (Estimate at Completion) if assessing against a revised target.
• Current CPI (EV/AC) for context and comparison.
• Approved changes, risk responses, and rate assumptions that affect remaining work.

Outputs Produced

• Computed TCPI value against BAC and/or EAC.
• Assessment of achievability versus current CPI and organizational constraints.
• Recommended corrective or preventive actions and cost control measures.
• Updated EAC/ETC and cost forecasts as needed.
• Inputs to stakeholder reports, variance explanations, and management decisions.

Interpretation Tips

• If TCPI(BAC) is much higher than CPI, meeting BAC is unlikely without significant changes.
• If TCPI(EAC) is close to current CPI, the revised EAC is consistent with observed performance.
• Values near 1.0 imply performance must match plan; higher than 1.1 indicates aggressive recovery is required.
• If AC is at or above the target (BAC or EAC), the denominator approaches zero or turns negative, signaling the target is no longer attainable.
• Use the same data cut and scope for EV and AC to avoid distorted ratios.

Example

Given BAC = 1,200,000; EV = 500,000; AC = 600,000.

• TCPI(BAC) = (1,200,000 - 500,000) / (1,200,000 - 600,000) = 700,000 / 600,000 = 1.17.
• Current CPI = EV / AC = 500,000 / 600,000 = 0.83.
• Since 1.17 is far above 0.83, holding BAC is unlikely; consider revising EAC and implementing cost controls.
• If a new EAC = 1,440,000 is adopted, TCPI(EAC) = (1,200,000 - 500,000) / (1,440,000 - 600,000) = 700,000 / 840,000 = 0.83, which aligns with current performance.

Pitfalls

• Mixing BAC and EAC in the numerator or denominator and getting the wrong ratio.
• Using stale EV/AC data or mismatched scope definitions between EV and AC.
• Interpreting TCPI in isolation without comparing to CPI, resource capacity, and constraints.
• Assuming TCPI > 1.0 is always achievable without considering schedule pressure and risk exposure.
• Ignoring that a near-zero or negative denominator indicates the target is already unattainable.

PMP Example Question

A project has BAC = 1,200,000, EV = 600,000, and AC = 750,000. Management wants to meet the original BAC. What is the TCPI to achieve BAC?

1. 0.80.
2. 1.33.
3. 0.75.
4. 1.20.

Correct Answer: B — 1.33.

Explanation: TCPI(BAC) = (BAC - EV) / (BAC - AC) = (1,200,000 - 600,000) / (1,200,000 - 750,000) = 600,000 / 450,000 = 1.33. Values above 1.0 indicate the team must outperform the original plan on remaining work.