PROJECT MANAGEMENT

ESTIMATE AT COMPLETION

Juli gupta (232009)

Sushant taneja (232011)

Forecasting

In project management we do forecasting to find

the future performance of projects.
We use three techniques in project management
for forecasting. These techniques are as follows:
Estimate at Completion (EAC)
Estimate to Complete (ETC)
To Complete Performance
Index (TCPI)

Estimate At Completion
(EAC)

The Estimate at Completion (EAC) gives you

the forecasted value of the project when it is
completed. It tells you how much you may
have to spend to complete the project.
In other words, you can say that it is the
amount of money that the project will cost you
at the end.
The Estimate at Completion can be determined
by four methods depending on the way the
project is performing.

Case 1
In this scenario you assume that the project will
continue to perform to the end as it was performing
until now i.e. the CPI will remain the same for the rest
of the project.
FORMULA

Estimate at Completion = (Budget at

Completion) / (Cost Performance Index)
EAC = BAC/CPI

From the above formula, you can conclude that:

If the CPI = 1, then EAC = BAC. This means you can complete
your project with your approved budget, and there is no need
to use forecasting analysis.
At the start of the project, the Estimate at Completion will be
equal to the budget at completion, i.e. EAC = BAC.

Example
Priya is the project manager for a KPO organization.
She is managing a large and complex project. In the
mid-way of the project ongoing; the higher
management asked her for an updated estimate of
the total cost of the project. At the beginning of the
project, the costs of the project were estimated at
$100000 to be completed in 12 months. Six months
have passed and 60,000 USD has been spent, but
on closer review you find that only 40% of the work
has been completed so far.
Find the Estimate at Completion (EAC) for this
project.

Solution
Budget at Completion (BAC) = 100,000 USD
Actual Cost (AC) = 60,000 USD
Planned Value (PV) = 50% of 100,000 = 50,000 USD
Earned Value (EV) = 40% of 100,000 = 40,000 USD
Cost Performance Index (CPI)

= EV / AC = 40,000 / 60,000

= 0.67
Estimate at Completion (EAC)

= BAC/CPI = 100,000/0.67

= 149,253.73
Hence, the Estimate at Completion (EAC) is 149,253.73 USD.
It means if the project continues to progress with CPI = 0.67
until the end, you will have to spend 149,253.73 USD to
complete the project.

Case 2

Here, you say that until now you have deviated

from your budget estimate; however, from now on
you can complete the remaining work as planned.
Usually this happens when, due to some
unforeseen conditions, an incident happens and
your cost elevates. However, you are sure that
this will not happen again and you can continue
with the planned cost estimate.
FORMULA

Estimate at Completion = Money spent to

date + Budgeted cost for the remaining
work
EAC = AC + (BAC EV)

Example
Ram is the project manager for a software
company. He is working on a project to develop
some software for the customer. During execution,
the project manager realized that mistakes were
made while collecting the project requirements.He
has fixed the mistakes and has placed a mitigation
plan in a place. At the start of the project, the costs
of the project were estimated to be $500,000. To
date he has spent 200,000 USD, and the value of
the completed work is 175,000 USD.
Calculate the Estimate at Completion (EAC).

Solution
Actual Cost (AC) =200,000 USD
Budget at Completion (BAC) = 500,000
Earned Value (EV) = 175,000
Hence,
EAC = 200,000 + (500,000 175,000)
= 200,000 + 325,000
= 525,000
Hence, the Estimate at Completion is 525,000
USD.

Case 3
You are over budget, behind schedule, and the
client is insisting you complete the project on
time. In this case, both the cost and the schedule
need to be taken into consideration.

FORMULA

Estimate at Completion = Actual Cost

+[(Budget at Completion - Earned
Value) /(Cost Performance Index X Schedule
Performance Index)]
EAC = AC + (BAC EV)/(CPI*SPI)

Example
Prem is working on a project. The CEO has told the
shareholders that the new system will be in place
in six months, without discussing this first with the
PMO. At the start of the project, the costs of the
project were estimated as $500,000. The project
has spent $200,000 so far and the value of the
completed work is 175,000 USD. However, as per
the schedule he should have earned 225,000 USD
to date.
Calculate the Estimate at Completion (EAC).

Solution
Budget at Completion (BAC) =500,000 USD
Actual Cost (AC) = 200,000 USD
Earned Value (EV) = 175,000 USD
Planned Value (PV) = 225,000 USD
To calculate the EAC, first you have to calculate the
CPI and SPI:
SPI = EV/PV = 175,000/225,000 = 0.78
CPI = EV/AC = 175,000/200,000 = 0.88
EAC

= AC + (BAC EV)/(CPI*SPI)

= 200,000 + (500,000 175,000)/(0.88*0.78)

= 671,000
Hence, the Estimate at Completion is 671,000 USD.

Case 4

This is the case when you find out that your cost
estimate was flawed and you need to calculate
the new cost estimate for the remaining work for
the project.
Here you will go to the activity level, find the cost
of each activity and sum them to get the total
cost ofEstimate
the remaining
work.
at Completion = Actual Cost +
FORMULA

Estimate at Completion = Actual Cost +

Bottom up Estimate to Complete
EAC = AC + Bottom-up ETC

Example
Abraham is the project manager for an ITES project
for $500,000.Suddenly, there is some scope change
request from the end customer and the higher
management asked project manager to give the
new estimate of the total cost of the project with
this new implemented scope on the project. The
project has already incurred an amount of $200,000
and the value of the completed work is $175,000.
Project manager after discussing with the team and
all the stakeholders decided that it will take 400,000
USD to complete the project.
Calculate the Estimate at Completion (EAC).

Solution
Budget at Completion (BAC) = 500,000 USD
Actual Cost (AC) = 200,000 USD
Earned Value (EV) = 175,000 USD
Bottom Up Estimate to Complete = 400,000
USD
EAC = AC + Bottom up Estimate to Complete
= 200,000 + 400,000
= 600,000
Hence, the Estimate at Completion is 600,000
USD.

THANK YOU