The Estimate To Complete (ETC) is an another Forecasting Tool in the Project Cost Management. It is the expected amount of money that you will spend to complete the remaining work.
For example, let’s say that you have a project, and about 30% of project is completed and 70% has to be completed.
In this case, the Estimate To Complete (ETC) is the expected amount of money to complete the remaining 70% of work.
The ETC tells you how much money you may have to spend to complete the project from this moment. It is the estimated cost to complete the remaining work.
There are many professionals who often confuse ETC with EAC. Estimate At Completion (EAC) is different from the Estimate To Complete (ETC).
EAC is the expected amount of money to complete the project. It tells you that how much the project will cost in the end.
In other words, you can say that the EAC is the expected amount of money to be spent to complete the project.
Note that, 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.
Estimate At Completion is equal to the Actual Cost spent on the project plus the expected cost to be spent to complete the balance of the work.
i.e.
Estimate At Completion = Actual Cost already spent + cost spent to complete the balance work
Estimate At Completion (EAC) = Actual Cost already spent (AC) + Estimate To Complete (ETC)
EAC = AC + ETC
ETC = EAC – AC
This means that you can find the value of ETC by subtracting the value of Actual Cost (AC) from the value of the Estimate At Completion (EAC).
Example:
You have a project to be completed in 12 months and the total cost of project is $100,000. Six months have passed and $60,000 is spent but on closer review you find that only 40% of the work is completed so far.
Find the Estimate To Complete (ETC) for this project.
Given in question:
Budget At Completion = $100,000
Actual Cost (AC) = $60,000
Planned Value (PV) = 50% of $100,000
= $50,000
Earned Value (EV) = 40% of $100,000
= $40,000
Cost Performance Index (CPI) = EV / AC
= $40,000 / $60,000
= 0.67
Hence,
Cost Performance Index (CPI) = 0.67
Now,
Estimate At Completion (EAC) = BAC/CPI
= $100,000/0.67
= $149,253.73
Estimate At Completion (EAC) = $149,253.73
Therefore,
Estimate To Complete (ETC) = EAC – AC
$149,253.73 – $60,000
= $89,253.73
Estimate To Complete = $89,253.73
Now, you can move to next blog-post about the To-Complete Performance Index (TCPI).
image credit =>renjith krishnan / FreeDigitalPhotos.net
Fahad,
Its’ a nice article.
Theoretically, it looks like Budget at completion (BAC) & Estimate at completion (EAC) both are same. Practically (based on the formulas) they are not same. What is your opinion?
Theoretically when project starts, BAC and EAC are same. But as the project progresses EAC keeps on changing unless you’re exactly proceeding as per your approved planned and your actual exependiture remains equal to the planned exependiture
After posting the question, i had realized that EAC is calculated once the project is started. BAC is calculated at the begining of the project.
Thanks.
it is really useful article to understand the concepts
Hi,
Since ETC = EAC – AC, rearranging it will give EAC = AC + ETC.
But EAC = AC + (BAC – EV), so can I say that ETC = BAC – EV?
Why can’t I just use ETC = BAC – EV in the example above to calculate the answer?
Thanks.
Of course Sandra, we can use it, who is stopping you!
@Sandra: As you said EAC = AC + (BAC-EV). My question is how did it come from? As I know, BAC-EV =AC so that means EAC = AC + AC? If yes, it’s incorrect. Please let me know
Thanks