Project management uses Earned Value Management (EVM) metrics to predict a project’s final financial outcome. Estimate At Completion (EAC) and Estimate To Complete (ETC) are two key metrics used for this purpose. These calculations provide a projection of the total funds necessary to finish all authorized work. Regularly generating these estimates allows project managers to provide stakeholders with updated information regarding budget compliance and potential financial risks. Understanding the distinction and application of EAC and ETC is fundamental for proactive control over complex undertakings.
Estimate At Completion (EAC): Definition and Purpose
Estimate At Completion (EAC) is the forecast of the total cost that will be incurred once all defined project scope is delivered. This metric determines the ultimate financial health of the project at its conclusion. The forecast is a summation of the actual costs already spent to date plus the projected costs needed for all remaining work.
Stakeholders rely on the EAC figure because it directly answers whether the project is projected to finish within, over, or under its initially approved budget. The EAC allows sponsors to compare the predicted final outlay against the original funding commitment. Regularly recalculating the EAC provides an early warning system, allowing for corrective actions before budgetary deviations become too large.
Estimate To Complete (ETC): Definition and Purpose
Estimate To Complete (ETC) quantifies the cost expected from the current status date until the project achieves completion. ETC is strictly concerned with the cost required for the remaining scope of work. It is a forward-looking measure that helps the project manager determine the necessary funding required for the immediate future.
The ETC is typically derived from a bottom-up re-estimation of outstanding activities, or it can be statistically determined based on past performance trends. This metric is a practical tool for resource allocation and for justifying future funding requests. The precision of the ETC impacts the accuracy of the EAC, as both are combined with actual costs to generate the total project forecast.
Foundational Earned Value Metrics
The calculation of EAC and ETC depends on established baseline data. Three metrics must be determined at the time of the forecast: Actual Cost (AC), Earned Value (EV), and Budget At Completion (BAC).
Actual Cost (AC) represents the total expenditure incurred for the work accomplished up to the status date. Earned Value (EV) measures the value of the work actually performed. Budget At Completion (BAC) is the total planned budget for the entire scope of work, representing the original target. These three metrics provide the necessary context for all future cost predictions.
Calculating EAC and ETC Based on Performance Assumptions
The selection of the correct EAC formula is a management decision based on the project manager’s assessment of whether past performance is indicative of future results. Different scenarios require different computational models to produce a credible forecast. The formulas detailed in the Project Management Body of Knowledge (PMBOK) guide offer distinct pathways for calculating the EAC, each tailored to a specific performance assumption.
EAC if Current Variances Are Expected to Continue
This scenario assumes that the cost performance efficiency observed to date will persist for the duration of the remaining work. This calculation relies on the Cost Performance Index (CPI), which is the ratio of Earned Value to Actual Cost. The formula used is EAC = BAC / CPI. This method scales the total planned budget by the current spending efficiency to project the final cost, and is often employed when the root causes of the current variances are systemic.
EAC if Future Work Will Be Completed at the Budgeted Rate
This approach is used when the project manager believes that past performance deviations were isolated incidents that will not be repeated. This model assumes that all future work will be completed according to the originally planned budget rate. The calculation combines the Actual Costs incurred to date with the remaining budget (BAC – EV). The resulting formula is EAC = AC + (BAC – EV). This method is appropriate when one-time events caused the initial variance, which have since been resolved.
EAC if Future Work Must Meet a Specific Goal
This method is used when statistical forecasting is deemed unreliable, requiring a manual, bottom-up re-estimation of the remaining work packages. It represents an accurate forecasting method because it is based on a detailed re-assessment of the effort, resources, and costs for every remaining activity. The formula is EAC = AC + ETC, where the Estimate To Complete (ETC) is developed by the team. This process is often triggered when the project is significantly off track or when the remaining work involves different risks or complexities.
Calculating ETC for Each Scenario
Once the Estimate At Completion has been determined using any of the established formulas, the Estimate To Complete is derived through subtraction. The general relationship ETC = EAC – AC holds true across all forecasting scenarios. This algebraic manipulation isolates the future cost component from the total projected final cost.
Using EAC and ETC for Project Forecasting and Control
EAC and ETC serve as fundamental inputs for project control and management decision-making. The generated EAC forecast informs senior management and sponsors about the project’s projected financial outcome, prompting discussions on mitigation strategies or necessary scope adjustments. If the EAC significantly exceeds the original Budget At Completion (BAC), the project manager may need to formally request a budget change, known as re-forecasting or establishing a new baseline.
The predictive power of these metrics allows managers to evaluate the feasibility of the current project plan. If the To-Complete Performance Index (TCPI) required to meet the BAC is unrealistically high, the EAC provides the evidence needed to reset stakeholder expectations.
The Estimate at Completion Variance (VAC) is a direct control metric, calculated by VAC = BAC – EAC. A negative VAC indicates a projected cost overrun, while a positive VAC suggests the project is likely to finish under budget. This variance analysis drives resource allocation decisions and influences risk planning for the remaining work. By continuously monitoring the EAC and ETC, the project team maintains proactive control.