Are your stakeholders asking you similar questions?
Now that we have approved the budget and that the project has begun, how much will it actually cost?
Last month was a long one. What did that do to the budget?
What amount will we have spent on this project by the time it is completed?
There are many studies that show that cost overruns can occur, with some finding that 9/10 projects go over budget (an average of 28%), so it’s not surprising project sponsors want to keep costs under control.
These questions can be answered with a project management strategy. This article will explain what Estimate At Completion is and how to use it. There are four ways to use it.
You can also download a Google Sheets spreadsheet EAC template.
What is EAC in project administration?
What is the formula to estimate completion?
There are 4 ways to calculate EAC1. Project is going according to plan
2. The project has had some difficulties but is now on the right track
3. Project needs new estimates
4. Future performance issues are anticipated by the Project
What is EAC used for?
How do I use EAC?
How to interpret EAC
How to report EAC
What is the difference between EAC & ETC?
Example of Estimate at Completion
Estimate at completion template
Next steps
What is EAC in project administration?
In project management, the estimate at completion (EAC), tells you how much the project will be worth when it is completed.
It is useful because it predicts final costs for the project. And what stakeholder wouldn’t want that information?
It is a tool that can be used to forecast project costs. It uses a variety of inputs, including what has been spent to calculate the expected budget given project performance.
EAC is part the Earned Value family of metrics and a crucial component of earned value analysis. Even if you don’t use earned value management to track project results, EAC can still be used. It’s a great way to make sure your project sponsor is onboard with costs if/when necessary.
EAC, by itself, is a simple concept that can be used to forecast project performance and costs. However, when combined with a variety of other EV measures, it becomes a powerful tool for managing project costs and project performance.
Practitioners who want to learn more about the PMI’s Standard For Earned Valuable are well served by the PMI Standard for Project Performance.
What is the formula to estimate completion?
There are four formulae to calculate EAC. It is important to understand the context before you decide which one to use.
The good news is that all of them make sense given the situation. If you use common sense thinking, you can choose the right one.
Note: Although we are talking about “estimate”, it is important to be a bit more advanced with forecasting than a rough order-of-magnitude estimate. To make the calculations meaningful, you will need to have very precise figures.
There are 4 ways to calculate EAC
These are the four methods to calculate EAC.
1. Project going according to plan
This formula is how to use it:
EAC = BAC/CPI
(Estimate At Completion equals Budget At Completion divided with Cost Performance Index)
This method of calculating EAC uses CPI, which is a reflection on how the project is tracking in relation to the budget forecast.
Use when: The project is likely to go according to plan, and there will be no significant deviation from the original estimates.
Tip: If CPI is not likely to change in the near future (because of some major issue, cost, delay that is coming), then you can choose one of the other methods for calculating EAC.
2. The project has had some difficulties but is now on the right track
This formula is how to use it:
EAC = (BAC + EV) + AC
(Estimate At Completion equals Budget At Completion minus Earned Valuable, minus Actual Cost)
Use when: Although there were some delays or performance issues, they were not major issues. Now, y