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7 - PROJECT COST MANAGEMENT

• EAc forecast for Etc work considering both SPI and cPI factors. In this forecast, the ETC work will
be performed at an efficiency rate that considers both the cost and schedule performance indices. This
method is most useful when the project schedule is a factor impacting the ETC effort. Variations of this
method weight the CPI and SPI at different values (e.g., 80/20, 50/50, or some other ratio) according to
the project manager’s judgment. Equation: EAC = AC + [(BAC – EV) / (CPI × SPI)]

Each of these approaches is applicable for any given project and will provide the project management team with
an “early warning” signal if the EAC forecasts are not within acceptable tolerances.

7.4.2.3 to-complete Performance Index (tcPI)

The to-complete performance index (TCPI) is a measure of the cost performance that is required to be achieved 7
with the remaining resources in order to meet a specified management goal, expressed as the ratio of the cost to
finish the outstanding work to the remaining budget. TCPI is the calculated cost performance index that is achieved
on the remaining work to meet a specified management goal, such as the BAC or the EAC. If it becomes obvious
that the BAC is no longer viable, the project manager should consider the forecasted EAC. Once approved, the EAC
may replace the BAC in the TCPI calculation. The equation for the TCPI based on the BAC: (BAC – EV) / (BAC – AC).

The TCPI is conceptually displayed in Figure 7-13. The equation for the TCPI is shown in the lower left as the
work remaining (defined as the BAC minus the EV) divided by the funds remaining (which can be either the BAC
minus the AC, or the EAC minus the AC).

If the cumulative CPI falls below the baseline (as shown in Figure 7-13), all future work of the project will need
to be performed immediately in the range of the TCPI (BAC) (as reflected in the top line of Figure 7-13) to stay
within the authorized BAC. Whether this level of performance is achievable is a judgment call based on a number
of considerations, including risk, schedule, and technical performance. This level of performance is displayed as
the TCPI (EAC) line. The equation for the TCPI based on the EAC: (BAC – EV) / (EAC – AC). The EVM formulas are
provided in Table 7-1.

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©2013 Project Management Institute. A Guide to the Project Management Body of Knowledge (PMBOK Guide) – Fifth Edition 221

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