How do you forecast the estimate at completion and the estimate to complete based on the actual cost in EVM?

1 What is the estimate at completion (EAC)?

One of the most important indicators that EVM provides is the estimate at completion (EAC), which is the projected total cost of the project at the end of its life cycle. The EAC can help you determine whether your project is on budget or over budget, and how much contingency reserve you need to allocate. There are different methods to calculate the EAC, depending on the assumptions and factors that affect your project. However, all methods use the actual cost (AC) as one of the inputs.

2 What is the estimate to complete (ETC)?

Another useful indicator that EVM provides is the estimate to complete (ETC), which is the projected cost to finish the remaining work of the project. The ETC can help you plan and control your project's resources and cash flow. The ETC is calculated by subtracting the actual cost (AC) from the estimate at completion (EAC). In other words, the ETC is the difference between what you have spent so far and what you expect to spend in total.

3 How to forecast the EAC and ETC based on the AC?

There are several formulas to forecast the EAC and ETC based on the AC, each taking into account different assumptions and factors that affect your project. For instance, the first formula assumes that the remaining work will be done at the planned rate and that cost variance is not indicative of future performance. It involves calculating BAC (budget at completion) and EV (earned value). The second formula assumes that the remaining work will be done at a different rate than planned, and requires a bottom-up analysis to calculate ETC (estimate to complete). The third formula takes into account only the cost performance index (CPI), while the fourth considers both CPI and SPI (schedule performance index). Finally, after calculating EAC with one of these formulas, you can easily calculate ETC by subtracting AC from EAC.

4 How to choose the best formula for your project?

When it comes to forecasting the EAC and ETC based on the AC, there is no one-size-fits-all solution. The ideal formula depends on the nature, complexity, and maturity of your project, as well as the availability and reliability of your data. As a general rule of thumb, use the first formula (EAC = AC BAC - EV) if your project is stable, predictable, and has a low cost variance (CV). The second formula (EAC = AC ETC) is best for dynamic, uncertain projects with high cost variance (CV). If your project is mostly affected by cost factors and has a consistent cost performance index (CPI), then use the third formula (EAC = BAC / CPI). Finally, if your project is affected by both cost and schedule factors, and has a variable cost performance index (CPI) and schedule performance index (SPI), then use the fourth formula (EAC = AC (BAC - EV) / (CPI * SPI)).

5 How to monitor and update your forecasts?

Forecasting the EAC and ETC based on the AC is not a one-time activity. It is a continuous process that requires regular monitoring and updating throughout your project's life cycle. You should review your EVM data and indicators at least once per reporting period, and compare them with your baseline plan and your stakeholder expectations. You should also identify and analyze any variances, trends, risks, or issues that may affect your project's performance and progress. Based on your findings, you should adjust your forecasts accordingly, and communicate them to your project team and stakeholders. By doing so, you can ensure that your project stays on track and delivers the desired value.

6 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?