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.
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.
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.
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.
- Bottom-up Cost Estimation
- 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
Therefore, Cost Performance Index (CPI) = 0.67
Now, Estimate at Completion (EAC) = BAC / CPI
= 100,000 / 0.67
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.
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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