Many times you simply want to know that from this point how much money you need to complete the task at hand.
In your personal life, you can go with the best guess, but in professional life you must adopt a professional approach and use proven techniques to reach a conclusion.
One such technique is Estimate to Complete (ETC), which gives you an approximate idea of how much money will be required to complete the remaining task.
This is a very important concept in project management, and you should understand it properly.
Therefore, I will explain this topic with three examples covering three different scenarios, and then we will do some mathematical questions.
Okay, let’s get started.
You are constructing your home with a target budget of $100,000 USD. You are halfway to completion, and you feel that you may have to spend more than what you had planned.
You ask your contractor to give you a fresh estimate for the remaining work.
Your contractor calculates the cost of the remaining work and tells you that from now it will take $70,000 USD to finish building your home.
This $70,000 USD is the Estimate to Complete.
You have a project that is 30% completed, and 70% remains unfinished.
In this case, the Estimate to Complete is the expected amount of money to complete this 70% of remaining work.
There is another scenario in which you may want to calculate the ETC.
Suppose that you’re building a five story building and, due to a financial crisis, you cannot complete the project.
Therefore, you decide to cut your building to three stories from five stories. It will save you a lot of money.
In this case, ETC will help you calculate your savings.
So technically, the Estimate to Complete is a forecasting tool in project management that tells you the expected amount of money that will be spent to complete the remaining part of the project.
I hope Estimate to Complete is clear to you.
However, there is another forecasting tool that is often confused with the Estimate to Complete. This tool is Estimate at Completion (EAC).
Visit: Estimate at Completion
There is a clear distinction between the Estimate to Complete and Estimate at Completion.
Estimate at Completion is the total cost of the project at the end. On the other hand, Estimate to Complete is the amount of money to complete the remaining work from a particular point.
Moreover, when the project starts, EAC is equal to the ETC. As the project progresses, the ETC starts decreasing, and at the end of the project it becomes zero.
How to calculate the Estimate to Complete
There are two methods to calculate the Estimate to Complete.
Case-I: Bottom up Cost Estimation
In this case you go to the activity level, find the cost of each activity for the remaining work, and add them to get the total cost of remaining work.
There is no formula in the Bottom up Cost Estimation technique.
A mathematical example on ETC (Case-I)
You have a project to build a government department’s building for $500,000 USD. To date you have spent $200,000 USD.
However, during your project execution you noticed that your cost estimation was flawed and you need to re-calculate your budget for the remaining part of the project.
You sit down with your team members and re-estimate the cost of the remaining work.
Your new estimate says that it will take $125,000 USD for construction, $75,000 USD for plumbing, $150,000 USD for painting, and $50,000 USD for other expenditures.
Calculate the ETC.
Given in the question:
BAC = $500,000 USD
AC = $200,000 USD
Cost of construction = $125,000 USD
Cost of plumbing = $75,000 USD
Cost of painting = $150,000 USD
Other expenditures = $50,000 USD
Since you are using Bottom up Cost Estimation, you will calculate the cost of each activity/work-package and then you will add them to get the final figure.
Estimate to Completion = Cost of construction + Cost of plumbing + Cost of painting + Other expenditures
= 125,000 + 75,000 + 150,000 + 50,000
Hence, Estimate to Complete is $400,000 USD.
Case-II: ETC = EAC – AC
In this case, calculating the ETC is really very straight forward.
First, you will calculate the Estimate at Completion, and then you will subtract the Actual Cost (AC) spent from it.
Estimate to Complete = Estimate at Completion – Actual Cost
ETC = EAC – AC
There are many ways to calculate the EAC. To calculate the EAC in different cases, you can visit my blog post on Estimate at Completion.
A mathematical example on ETC (Case-II)
You have a project to be completed in 12 months, and the total cost of the project is $100,000 USD. Six months have passed and $60,000 USD has been spent, but on closer review you find that only 40% of the work is completed so far.
Your project is expected to perform with same cost performance.
Find the Estimate to Complete (ETC) for this project.
Given in the question:
Budget at Completion (BAC) = $100,000
Actual Cost (AC) = $60,000
Planned Value (PV) = 50% of $100,000
Earned Value (EV) = 40% of $100,000
To determine ETC first we have to find the EAC.
And, EAC = BAC/CPI
Cost Performance Index (CPI) = EV / AC
= $40,000 / $60,000
Cost Performance Index (CPI) = 0.67
Estimate at Completion (EAC) = BAC/CPI
Estimate at Completion (EAC) = $149,253
Estimate to Complete (ETC) = EAC – AC
$149,253 – $60,000
Hence Estimate to Complete (ETC) for this project is $89,253 USD.
This is the end of this blog post on Estimate to Complete. If you have something to share, you can share your thoughts through comments section.
Now, you can move on to next blog post on To-Complete Performance Index (TCPI).
This topic is very important for the PMP exam. You may see a few questions from this topic on your exam.
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