Estimate to Complete ETC Another Project Forecasting Tool

The Estimate to Complete (ETC) tool is essential for the PMP exam. You may see a few questions from this topic on your exam.

Cost will change constantly during your project. Therefore, clients have a relentless interest in knowing the price of the remaining tasks.

This is professional project management, you must adopt proven techniques to reach an estimation so you can provide it to the stakeholders.

One such technique is the Estimate to Complete (ETC). This is another forecasting technique, used along with the Estimate at Completion, it gives you the approximate cost required to complete the remaining work.

This is an important forecasting technique. I will explain this topic with three simple examples. Afterward, we will solve some mathematical questions.

Example I

You are constructing a house with a budget of 100,000 USD. You are halfway to completion, and you find that you may have to spend more than you planned. Therefore, you ask a team member to give you a new estimate for the remaining work.

They calculate the cost of the remaining work and informs you that from now it will take 70,000 USD to finish building the house.

This 70,000 USD is the Estimate to Complete.

Example II

You are working on a project that is 30% completed.

The Estimate to Complete is the expected cost to complete this 70% of the remaining work.

Example III

There is another scenario to calculate the Estimate to Complete.

You are constructing a five-story building and, because of financial issues, you cannot complete the project. Therefore, you cut your building down from five to three stories to adjust to the budget.

The Estimate to Complete will help you calculate your savings.

There is another forecasting tool that is often confused with the Estimate to Complete. This tool is the Estimate at Completion (EAC).

Estimate at Completion is the total cost of the project at the end, while the Estimate to Complete is the cost required to complete the remaining work.

When the project starts, the EAC is equal to the ETC. As the project progresses, the ETC starts decreasing, and at the end it becomes zero.

How to Calculate the Estimate to Complete (ETC)

There are two methods.

  1. Bottom-up Cost Estimation
  2. ETC = Estimate at Completion – Actual Cost

Case I: Bottom-Up Cost Estimation

Here, you calculate the cost of the remaining work. Afterwards, you add them to get the total cost of the remaining work.

There is no formula for the Bottom-Up Cost Estimation technique.

Example of ETC (Case I)

You have a project to build a government department’s building for 500,000 USD. You have spent 200,000 USD to date. However, you realize that your cost estimation was flawed, and you need to re-calculate your budget for the remaining part of the project.

 

So, you re-estimate the cost of the remaining work. The new estimate is: 125,000 USD for construction, 75,000 USD for plumbing, 150,000 USD for painting, and 50,000 USD for other expenditures.

 

Calculate the Estimate to Complete (ETC).

 

Given in the question:

 

BAC = 500,000 USD

 

AC = 200,000 USD

 

Construction Cost =125,000 USD

 

Plumbing Cost = 75,000 USD

 

Painting Cost =150,000 USD

 

Other expenditures =50,000 USD

 

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 Complete = Cost of construction + Cost of plumbing + Cost of painting + Other expenditures

 

= 125,000 + 75,000 +150,000 + 50,000

 

= 400,000 USD

 

Hence, the Estimate to Complete is 400,000 USD.

Case II: ETC = EAC – AC

Finding the Estimate to Complete is straightforward in this case. You will calculate the Estimate at Completion and then you will subtract the actual cost from it.

Estimate to Complete = Estimate at Completion – Actual Cost

ETC = EAC – AC

There are several ways to calculate the EAC. You can visit my blog post on Estimate at Completion to calculate the EAC in different cases.

Example of ETC (Case II)

You have a project with a BAC of 100,000 USD and a duration of 12 months. 6 months have passed, and you have spent 60,000 USD. Upon closer view, you find that only 40% of the work has been completed. Your project is expected to perform with the same cost.

 

Find the Estimate to Complete (ETC) for this project.

 

Given in the question:

 

Budget at Completion (BAC) = 100,000 USD

 

Actual Cost (AC) = 60,000 USD

 

Planned Value (PV) = 50% of 100,000 USD

 

= 50,000 USD

 

Earned Value (EV) = 40% of 100,000 USD

 

= 40,000 USD

 

To determine the ETC, you need the EAC.

 

And, EAC = BAC / CPI

 

Hence, Cost Performance Index (CPI) = EV / AC

 

= 40,000 / 60,000

 

= 0.67

 

Therefore, Cost Performance Index (CPI) = 0.67

 

Now, Estimate at Completion (EAC) = BAC / CPI

 

= 100,000 / 0.67

 

= 149,253

 

Estimate at Completion (EAC) = 149,253 USD

 

Now, Estimate to Complete (ETC) = EAC – AC

 

= 149,253 – 60,000

 

= 89,253 USD

 

Hence the Estimate to Complete (ETC) for this project is 89,253 USD.

Summary

The Estimate to Complete is the expected cost required to complete the remaining work of the project. You will use this forecasting tool when the estimate is no longer valid and you need a new estimate for the remainder of the work. This tool is useful whenever the cost baseline deviates. You will use this tool and communicate the information to stakeholders to get the new budget approved.

How have you been using Estimate to Complete (ETC) in your project? Please share your experience in the comments section.

This blog post is the sixth in a series of seven on earned value management and project forecasting. Please read through my earlier posts before reading this post if you’re coming here from a search engine or a referral.

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Speak Your Mind

  • You are three months into the five-month bathroom remodeling project. The original budget (BAC) is R1.500 and you have completed approximately 40% of the work. You currently are running over-budget, as indicated by a cost performance index (CPI) of 0. 67. Actual costs to date have been R900.

    Calculate the following and interpret the results:
    1. You learn that the contractor found some mold in the shower and needed to replace it, causing a one-time variance.What is the Estimate to Complete (ETC)?
    2. You learn that the workers that are being used are actually much more expensive than you originally estimated, this would be a typical variance as its going to continue to affect the project. What is the Estimate to Complete (ETC)?

  • Example of ETC (Case II) is great but slightly inaccurate. The result should be 90K solid.

    The error comes from rounding 60/40, which is 0.67 rounded from 0.666666666…… , however, if you calculate EAC directly like so:

    ETC = EAC – AC =
    (Budget at completion / CPI) – AC =
    (Budget at completion / (EV / AC) ) – actual =
    (Budget at completion * AC / EV) – actual =
    (100k * 60k / 40k ) – 40k =
    90k.

    … then you don’t get rounding errors.

    But that doesn’t actually matter because I think PMI tests do the same mistake.

  • Hi

    Need some clarity on the relationship between ETC/EAC and Contingency Reserve/Management Reserve. I could vaguely recollect to see the explanation in one of your blogs but could not locate now. Please help.

  • Hi,
    Somewhere o.j. mangy early notes, I ran across the following 2 formulas. I can’t seem to find them in texts. Are either correct? Did I write them incorrectly?

    ETC = BAC – EV. and ETC =BAC-EV/CPI

    (I’m familiar with ETC= EAC-AC)

    Thank you.

  • You use the formula “ETC = BAC – EV” with an assumption that you can complete the project with planned CPI.

    You use the formula “ETC = (BAC – EV)/CPI” with an assumption that the future cost performance will be same as the current cost performance.

  • Hi there,

    I had a question about two other formulas I was given to calculate ETC…

    ETC=(BAC-EV)/CPI
    ETC=(BAC-EV)/CSI

    When would you use these indexes in the ETC, can you provide an example?
    If I were to assume my cost is on budget, but work is ahead of schedule: wouldn’t that mean my original ETC is still valid and just my schedule is flawed? (I am misunderstanding when CPI and CSI would come into play in this scenario because my index is >1)

  • Hello Fahad,

    Would you please explain why the following equation did not give the same result as I use

    ( ETC = BAC – EV )to get ETC

    While you use EAC – AC = ETC

    Thank you very much for your time

    Waiting your response

  • Hello Fahad,

    I really appreciate it if you could answer the following confusing questions;

    1- Project manager has gone to review project and collect feedback with the resources Managers …which process is he envolving??

    – project communication ?
    – Stakeholder Analysis?

    2- After fire has took place..the first thing employees have to do ?

    – use contingency reserve
    – asses the damage and update project documents

    3- A client has agreed to get the project which is located on the Earthquake zone , you as project manger asked to assess the business case ;

    – you have to determine if the client has made a right decision
    – is it worthy to invest?

    Also there is an answer to the question does not make any sense !

    1-Your approved cost baseline has changed because of
    a major scope change on your project. Your next step should be to—

    a. Estimate the magnitude of the scope change
    b. Issue a change request
    c. Document lessons learned
    d. Execute the approved scope change

    The answer is B but does’nt make sense …I chose D?? I assumed since there has been change that means change request is already done !

    Thank you very much for your time

    Waiting your response

  • Hello Fahad,

    Great article, tremendous help for understanding the fundamentals in simple manner.
    Keep up the good work !

    Thanks

  • Excellent Explanation….. very well written… Have been studying for past 2 months but was lost…This is much better than other explanations… Thanks!!!

  • Hi,

    The explanation given by you is very clear and nice. It helped me to clear many of the questions I had in my mind.

    Thanks a lot for this blog.
    Sekar

  • Hello,

    thank you so much for these very good examples. Could you help me find out how to calculate the estimated time to complete? Especially in cases where one is behind schedule.

    Thank you in advance,
    Daniela

  • Hello – very useful explanations – thank you so much.

    One query I have which I can’t get my head around is proving mathematically that if EAC = IEAC then CPI = TCPI ?
    For example – If EAC is simply independent estimate at completion (IEAC) then the TCPI is the same as the cost performance index (CPI), and we do not change our performance so IEAC is the correct estimate of our final cost – but how do I prove this mathemtically? CPI = TCPI?

  • Dear Fahad

    I wish to inform you that I passed PMP on 13th Feb, 2014. I also wish to inform you that It was nice experience going though your explanation of the terms. There is no feedback area , so writing it here. Thanks once again.

    Regards

    • Congratulations Anish for passing the Exam. Would be glad if you share you detailed lessons learned here at PMSC.

      Fahad

    • Hi Sandra,

      would you please clear it why the result not the same. as per Fahad , he said that you can use it
      ETC = BAC – EV , but if I use it , it will give me different result

      Thanks

  • @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

    • Kenzao

      If past performances are likely to occur in the future, then EAC= AC+(BAC-EV)/CPI where CPI is Cost Performance Index so far.
      If past performances are in line with planification, then CPI=EV/AC=1

      Your statement BAC-EV=AC is not true (never true !!!)

  • 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.

  • 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.

  • 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

    • Good evening,

      If I apply the instructions above, I seem to get a different answer when working on a practice PMP exam question. If any one could help me out, I’d really really really appreciate it!

      A project was estimated to cost $ 200,000 with a timeline of 10 months. Due to a shipment delay, the schedule was slightly delayed. This was however made up by receiving the first batch of materials for the project by air. The net result was that there was some additional cost in the project. At the end of the second month, the Project Manager reviews the project and finds that the project is 20% complete and Actual Costs are $ 50,000. The Estimate to complete (ETC) for the project would now be:

      A. $160,000
      B. $210,000
      C. $250,000
      D. $200,000

      • Hi – in this case you cannot just reestimate using the bottom up estimation technique. Here you have the following situation:

        1. Your scheduled was delayed due to shipment delayed (eventhough it then got back on track)
        2. You had additional costs due to getting the materials through the air.
        3. You have already spent $50k
        4. In this situation you need to consider both, your CPI and your SPI because your schedule was delayed and you had some additional costs which you impact your budget at completion.

        In order to get your ETC you use the formula ETC = EAC – AC. How do you get the EAC? One of the formulas to get the EAC is EAC= AC + (BAC – EV) / CPI*SPI. Now lets calculate:

        By now you know the following:

        1. BAC = $200,000 for 10 month project duration
        2. AC = $50,000 spent to date
        3. You have only completed 20% of your work by the second month (this is your Earned Value)

        But, what is your Earned Value (EV)? Well, if your project is expected to cost $200,000 in 10 months, that means that you are supposed to spend $20,000 per month. This means that by second month you have spent $40,000 (this is your PV). Since you have already completed 20% of the work, this means that by now your EV should be $40,000 in month two ($200,000*20%).

        Knowing your EV, PV and AC, now you can calculate your CEAC= AC + (BAC – EV) / CPI*SPIPI and SPI.

        Lets calculate the CPI and SPI:

        CPI = EV/AC = $40,000/$50,000 = 0.8 – bad
        SPI = EV/PV = $40,000/$40,000 = 1 – good

        Now calculate the EAC:
        EAC= AC + (BAC – EV) / CPI*SPI
        EAC = $50,000 + ($200,000 – $40,000) / 1(0.8)
        EAC = $50,000 + ($200,000) = $250,000

        Now calculate your ETC
        ETC = EAC – AC
        ETC = $250,000 – $50,000 = $200,000. So correct answer is D. Hope this helps!!!!!

        • What if I use EAC=AC+(BAC-EV). That gives EAC as 210,000 and ETC as 160,000 which is option A. Which one do we need to use?

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