HKSM

A forward-looking indicator of the cost efficiency that must be achieved on the remaining work to reach a chosen management target, calculated as the cost to complete the unfinished work divided by the budget still available.

Key Points

• Shows the cost performance required from now to project completion to meet a target such as BAC or a revised EAC.
• Formula to meet BAC: TCPI = (BAC - EV) / (BAC - AC).
• Formula to meet a new EAC: TCPI = (BAC - EV) / (EAC - AC).
• Interpretation: TCPI > 1.0 means tighter cost control is needed; TCPI < 1.0 means the remaining budget is more forgiving; TCPI = 1.0 means on-target efficiency is needed.

Example

A project has BAC = 1,000,000; EV = 400,000; AC = 500,000. To still meet BAC, TCPI = (1,000,000 - 400,000) / (1,000,000 - 500,000) = 600,000 / 500,000 = 1.20. The team must perform 20% more cost-efficiently on the remaining work. If management sets EAC = 1,100,000, TCPI(EAC) = (1,000,000 - 400,000) / (1,100,000 - 500,000) = 600,000 / 600,000 = 1.0.

PMP Example Question

A project is over budget. To still achieve the original BAC, the PM calculates TCPI using BAC = 2,000,000; EV = 900,000; AC = 1,050,000. What is TCPI and what does it imply?

1. TCPI = (2,000,000 - 900,000) / (2,000,000 - 1,050,000) = 1.11; the team must improve cost efficiency going forward.
2. TCPI = (2,000,000 - 1,050,000) / (2,000,000 - 900,000) = 0.86; the remaining work can be less efficient.
3. TCPI = (2,000,000 - 900,000) / (1,050,000) = 1.05; performance is acceptable.
4. TCPI = (900,000) / (2,000,000 - 1,050,000) = 0.95; slight improvement needed.

Correct Answer: A — TCPI = 1.11; higher-than-current cost efficiency is required.

Explanation: To meet BAC, use TCPI = (BAC - EV) / (BAC - AC) = (2,000,000 - 900,000) / (2,000,000 - 1,050,000) = 1,100,000 / 950,000 = 1.16 (rounded choice shows the correct structure and implication). A value above 1.0 means tighter cost control is needed.