PMP Formula: Estimate at Completion
Estimate at Completion (EAC) is the expected total cost of completing all work expressed as the sum of the actual cost to date and the estimate to complete. EACs are typically based on the actual costs incurred for work completed, plus an estimate to complete (ETC) the remaining work. It is incumbent on the project team to predict what it may encounter to perform the ETC, based on its experience to date. Earned value analysis works well in conjunction with manual forecasts of the required EAC costs. The most common EAC forecasting approach is a manual, bottom-up summation by the project manager and project team.
The project manager's bottom-up EAC method builds upon the actual costs and experience incurred for the work completed, and requires a new estimate to complete the remaining project work. Equation: EAC = AC + Bottom-up ETC.
The project manager's manual EAC is quickly compared with a range of 272 calculated EACs representing various risk scenarios. When calculating EAC values, the cumulative CPI and SPI values are typically used. While EVM data quickly provide many statistical EACs, only three of the more common methods are described as follows:
EAC forecast for ETC work performed at the budgeted rate. This
EAC method accepts the actual project performance to date
(whether favorable or unfavorable) as represented by the
actual costs, and predicts that all future ETC work will be
accomplished at the budgeted rate. When actual performance is
unfavorable, the assumption that future performance will
improve should be accepted only when supported by project risk
Equation: EAC = AC + (BAC - EV).
EAC forecast for ETC work performed at the present CPI. This
method assumes that what the project has experienced to date
can be expected to continue in the future. The ETC work is
assumed to be performed at the same cumulative cost
performance index (CPI) as that incurred by the project to
Equation: EAC = BAC ÷ CPI.
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 weigh 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 x SPI)].
|EAC||Estimate at Completion (many versions of this formula)|