Estimate at Completion (EAC) is a forecasting tool in project management.

Forecasting helps predict the future performance of projects. It is based on the past performance of the project and objective data. With this information in hand, you can guess future progress and find early indications of a deviation.

We have three forecasting techniques in project management:

- Estimate at Completion (EAC)
- Estimate to Complete (ETC)
- To Complete Performance Index (TCPI)

In this blog post we will discuss Estimate at Completion (EAC) in detail and the other two techniques briefly.

### What is Estimate at Completion (EAC)?

According to the PMBOK Guide, Estimate at Completion is “The expected total cost of completing all work expressed as the sum of the actual cost to date and the estimate to complete.”

Just in case the definition above doesn’t give you a complete picture, let me give you a simple example.

Let’s say you are somewhere in your project. The client comes and asks you how much they have to spend to complete the project and your project has deviated from the cost baseline.

Therefore, you will estimate the new budget and give this number to the client. This is the

Estimate at Completion (EAC). Estimate at Completion allows the project manager to see the final project cost estimate.

Project work does not always go as planned. There are many circumstances beyond your control that may require a change in your plan. Funding requirements keep on changing from the moment the project starts.

It is your responsibility as a project manager to influence the factors that cause changes. However, if alterations occur, you have to manage them.

You will evaluate the impact of each change on the project’s objectives and take action as needed.

You can calculate the Estimate at Completion in three different scenarios.

#### Case 1: EAC = BAC / CPI

You assume that the project will continue to perform, to the end, as it has been performing in this scenario.

In other words, your future performance will be the same as your past performance. Therefore, the CPI will remain unchanged until the project ends.

#### The Formula for the Estimate at Completion

You can calculate Estimate at Completion by dividing the Budget at Completion by the Cost Performance Index.

Estimate at Completion = (Budget at Completion) / (Cost Performance Index)

Or,

EAC = BAC / CPI

- If the CPI = 1, then EAC = BAC. This means you can complete your project with your approved budget analysis.
- The Estimate at Completion will be equal to the budget at completion at the start of the project, i.e., EAC = BAC.

**Example of the Estimate at Completion (Case 1)**

You have a project to be completed in 12 months and the cost is 100,000 USD. 6 months have passed, and 60,000 USD has been spent, but upon closer review, you find that only 40% of the work has been completed.

Find the Estimate at Completion (EAC) 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

= 50,000 USD

The question did not say that the Planned Value was 50%. However, it says that the duration is 12 months and 6 months have passed. In this case, you can safely assume that the PV was 50% unless it is given in the question.

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

= 40,000 USD

First, you have to calculate the Cost Performance Index to calculate the EAC:

Cost Performance Index (CPI) = EV / AC

= 40,000 / 60,000

= 0.67

=>Cost Performance Index (CPI) = 0.67

Now,

Estimate at Completion (EAC) = BAC / CPI

= 100,000 / 0.67

= 149,253.73

Hence, the Estimate at Completion (EAC) is 149,253.73 USD.

In other words, if the project continues with CPI = 0.67 until the end, you will have to spend 149,253.73 USD to complete it.

The Estimate at Completion (EAC) gives the amount of money the project will cost at the end.

The Estimate at Completion can be determined by four methods, depending on how the project is performing. However, from a PMP certification exam point of view, the first method is the most important. There is a smaller chance you will see questions based on the others.

#### Case 2: EAC = AC + (BAC – EV)

Here, you have deviated from your budget estimate, but from now on you can complete the remaining work as planned.

Unforeseen circumstances or one-time incidents can cause this to happen and will increase costs. However, it will not happen again and you can complete the remaining work as planned.

In this formula, you add the money spent to date to the budgeted cost of the remaining work.

#### The Formula for the Estimate at Completion

The formula to calculate the Estimate at Completion in this case is:

Estimate at Completion = Money spent to date + budgeted cost for the remaining work

EAC = AC + (BAC – EV)

**Example of the Estimate at Completion (Case 2)**

You have a project with a budget of 500,000 USD. An incident during the execution phase costs you a lot of money. However, you are sure that this will not happen again, and that you can continue with your calculated performance for the rest of the project.

To date, you have spent 200,000 USD, and the value of the completed work is 175,000 USD.

Calculate the Estimate at Completion (EAC).

You will use this formula because the cost increase is temporary and you can complete the rest of the project as planned.

Estimate at Completion = Money spent to date + (Budgeted cost for the remaining work – Earned Value)

EAC = AC + (BAC – EV)

Given in the question:

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 USD

Hence, the Estimate at Completion is 525,000 USD.

#### Case 3: EAC = AC + [(BAC – EV) / (CPI * SPI)]

You are over budget, behind schedule, and the client is insisting you complete the project on time. The cost and schedule performance must be taken into consideration.

#### The Formula for the Estimate at Completion

Estimate at Completion = Money spent to date + (Budgeted cost for the remaining work – Earned Value) / (Cost Performance Index * Schedule Performance Index)

EAC = AC + [(BAC – EV) / (CPI * SPI)]

**Example the Estimate at Completion (Case 3)**

You have a fixed deadline for a project with a budgeted cost of 500,000 USD. To date, you have spent 200,000 USD, and the value of the completed work is 175,000 USD. However, according to the schedule, you should have earned 225,000 USD by now.

Calculate the Estimate at Completion (EAC).

Given in the question:

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

Now, you can use the formula:

EAC = AC + [(BAC – EV) / (CPI * SPI)]

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

= 200,000 + 325,000 / 0.69

= 200,000 + 471,000

= 671,000 USD

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

#### Case 4: EAC = AC + Bottom-up Estimate to Complete

In this situation, you find out that your cost estimate was flawed and you must calculate the new cost estimate for the remaining project work.

Here, you will go to the activity level to find each cost and add them and get the cost of the remaining work.

**Example of the Estimate at Completion (Case 4)**

You have a project to construct a government department building for 500,000 USD. To date, you have spent 200,000 USD, and the value of the completed work is 175,000 USD. However, you noticed your cost estimation was flawed. Therefore, you need to calculate your budget again for the remainder of the project.

You gather your team members and re-estimate the cost of the remaining work. Your new estimate shows that it would take 400,000 USD to complete the remainder of the project.

Calculate the Estimate at Completion (EAC).

Given in the question:

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

Here, you will use the formula:

EAC = AC + Bottom-up Estimate to Complete

= 200,000 + 400,000

= 600,000 USD

Hence, the Estimate at Completion is 600,000 USD.

### Forecasting Technique #2: Estimate to Complete (ETC)

Estimate to Complete is the second forecasting technique. It is the cost of completing the remaining work.

Estimate to Complete = Estimate at Completion – Actual Cost

ETC = EAC – AC

### Forecasting Technique #3: To Complete Performance Index (TCPI)

The To Complete Performance Index estimates how fast you have to move to achieve the target.

It is the estimate of the future cost that you may need to complete the project within the approved budget. This budget may be the BAC or an updated budget, i.e., Estimate at Completion (EAC).

TCPI = (Remaining Work) / (Remaining Funds)

TCPI = (BAC – EV) / (BAC – AC)

Or

TCPI = (BAC – EV) / (EAC – AC)

### Summary

The Estimate at Completion is an excellent forecasting tool. It allows project managers to make realistic budget revisions. It gives you a mid-project estimation of the overall cost that your project may take to complete. Once this estimate is approved, this will be your new budget. The EAC is not fixed, it may change as the project progresses. Estimate at Completion should be revised periodically or as defined in the project management plan.

How often do you use Estimate at Completion (EAC) during your projects? Please share your experience in the comments section.

This blog post is the fifth in a series of seven on Earned Value Management and project forecasting. Please read through my previous posts before reading this post if you’re coming here from a search engine or a referral.

The following are the links for other blog posts:

First of all…very helpful so thanks. I believe i see an error where “Budgeted cost for the remaining work” already includes the subtraction of the earned value in Case 3.

Estimate at Completion = Money spent to date + (Budgeted cost for the remaining work – Earned Value) / (Cost Performance Index * Schedule Performance Index)

EAC = AC + (BAC – EV) / (CPI * SPI)

Please refer to the PMBOK Guide 6th edition page: 265.

The formula is right, but in the explanation it is saying budgeted cost of work remaining is equal to BAC – EV

It should either say Budget at completion – Earned value (BAC – EV)

or just say Budgeted cost of Work remaining for (BAC – EV) because the fact is

BAC – EV is actually the Budgeted Cost of Work Remaining

What is “Earned value (BAC – EV)”

I’ve tried using all 4 formulas for EAC with same scenario (example below) and getting different values as results. Do this mean that we have to pick the right formula according to project situation or else we might get misleading information/interpretation?

Example:

BAC = 100,000

AC = 60,000

EV = 40,000

PV = 50,000

Every formula should be used for corresponding situation.

Fahad,

Many thanks for your explanations. I’m finding them very helpful. One question.

In Case 3, why wasn’t the calculation 200,000+325,000 = 525,000 then 525,000/.69 = $760,870

Please explain. Many thanks, Trudy

Hello Trudy, you have to input values in formulas as is. Derivation of this formula is beyond the scope of the PMP exam.

Hi Fahad,

I have a question about what you said about EAC especially with the statement of formula:

EAC = AC + (BAC – EV)

why are you say (Budgeted cost of the remaining work – Earned Value) … correct me if I’m wrong.

Regards

Abahussein

It is Budgeted Cost of the work – Earned Value.

Working as a Contractor with signed contract agreement, estimate can’t be altered. Please guide in this scenario.

If it is a fixed priced contract, the cost cannot be changed.

I have been teaching and accomplishing Earned Value Project Analysis for over 20 years and I do have some spreadsheets for the development of IEACs.

Your for the asking.

Thanks Roger for asking. You can send them at [email protected]

when you say a project is complete?

a) budget at completion is equal to earned value

b) Earned value is equal to Cost value

write the most authentic relationship

When the project is completed, earned value is equal to planned value.

When you revise the budget, your EAC will be your new BAC.

Hello Fahad

I could not pass my PMP in first attempt. I am studying again. The exam is changing after Jan 11th. What would be your suggestion about changes coming up. Should I try to give exam before or after. Kindly advise.Thank you

One month time is enough to prepare for the second attempt. You can try it before the exam changes.

Fahad,

When can we apply these formulas?

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

EAC=AC+(BAC-EV)/CPI

EAC=BAC/CPI

EAC=BAC/CPI*SPI

All three formula mentioned in the PMBOK Guide has already been explained in this blog post.

Dear Fahad,

Thanks for the detailed explanation.

I am confused with some calculation and need guidance.

In the 1st example(1st case) where EAC = BAC/CPI, BAC = 100000, EV = 40000 and AC = 60000. CPI = 0.67 thus EAC = 100000/0.67 = 149253.7

But if we calculate it in another way EAC = 100000/(40000/60000), as per cross calculation EAC = (100000 * 60000)/40000 = 150000.

We get accurate values for normal equations like 5/(2/10) which can be 5/0.2 still 25 and 5*10/2 still 25. Here i am unable to understand the reason for this difference.

Can you guide !!

Regards,

Reshma

I took the round figure in decimal for CPI, that is why you are seeing this difference.

See references Marked for review

61. You are performing earned value technique on your project.

After budget approval, an additional and unexpected cost item has been identified, which made the project more expensive some weeks ago. The item has meanwhile been paid by the project team, and it is expected that for the remaining duration of the project, costs will be as budgeted.

In this case, which is the best formula to calculate EaC (Estimate at Completion)?

1 EaC = BaC – CV

2 EaC = BaC / CPI

3 EaC = AC + BtC / CV

4 You can not compute the EaC.

Hi Fahad

Do we generally take the Commitments when we calculate the Actual Cost ?(to elaborate, Actual Cost todate + Commitments= Total Cost). To arrive at Estimate at Completion, is it fair to consider the Total cost rather tahn the Actual cost (as its already commited for the project) and estimate to complete should be remaining work to be done excluding the commitments.

Please throw some light on this

Thanks

Shri M

Whatever you have spend is Actual Cost.

For the other part, I did not understand you question clearly. Please explain it again if you can.

Hi Fahad,

Saw this pmstudy and it explains formula’s very well. I have a query regarding

Case-III: EAC = AC + (BAC – EV)/(CPI*SPI)

You are over budget, behind schedule, then you use (CPI * SPI) both

a) How about if only over budget (within schedule) — Should we use only CPI at bottom ? –>> EAC = AC + (BAC – EV)/CPI

b) How about if only behind schedule (within budget) — Should we only use SPI at bottom ? —>>> EAC = AC + (BAC – EV)/SPI

Does that make sense? Please let me know . Thanks

If you are over budget and within schedule you can use either case-I or case-II.

EAC is for cost estimation. If you are within budget and behind the schedule, you will go for schedule compression technique to bring project on schedule.

Can you please let me know why project schedule is input for determine budget process. It is planning process so why we are not using schedule baseline as input.

IF you read Rita, it says (and real scenario too) the cost of procurement (services or resources) may also vary on the “time of year” , eg raw material for cap may be expensive during winters , so overall cost of woolen production will go high if you choose to procure during winters , thus it is considered while determining budget.

Hope my understanding is correct .

Yes.

Dear Fahad,

If it possible to explain the following

what is the logic behind using $ ( Money value ) to measure time,i.e. using PV in the equations ( SV=EV-PV) to indicate that we are behind or ahead of schedule

Thanks and regards

Then tell me how are you going to measure the schedule?

logic wise we measure length in meter,Foot…etc

and time in Hours,days,…etc

schedule measured in …. time

the results of SV should be measured in “time metrics”

So why the person who invented the Earned value management….considered planned value = $ ..i.e. Money…..and the results are behind schedule or ahead of schedule show time?

Earned Value Management is all about the money, it is about how much have you spent and earned and how are you progressing in $ terms.

Dear Fahed

great efforts as usual , i appreciate your efforts and your smooth explanation but if you don’t mind i have some questions:

1- in Case no 1 , it has not been mentioned that CPI will be the same to the end of the project in the problem , so if i face same problem in the exam how can i guess that CPI will be the same to use this formula ?

2-in case no II , as you have highlighted that we can complete the remaining work as planned , what does it mean ? I understood that BAC has to be the same until the end of the project , it means the value of BAC has to equal the EAC !! or how we can complete the remaining work as planned ? and finally you calculated EAC is 525000 while BAC is 500000 ! , so how we completed the remaining work as planned ?

Thanks in advance

Best regards

For case-I, I have already written that:

“In this scenario you assume that the project will continue to perform to the end as it was performing up until now”.

In the second case you have over spend till certain point, however, after that you can complete that tasks with previously estimated cost.

Hi Fahad

just wandering in the EVM ,

we have the EAC=AC+ETC , then we have the EAC = AC+ (BAC- EV)

Finally e have the EAC = AC+ (BAC-EV)/CPI

How was that driven?!

thanks much indeed for your support

Ala’a

For the exam it is sufficient to know the formula, derivation of formula is outside the scope of the exam.

These two are different parameters. For schedule performance, you will only look at SPI.

Hi Fahad,

Can you explain about the TCPI (To Complete Performance Index)?

Thanks in advance

It is explained here:

https://pmstudycircle.com/2012/05/to-complete-performance-index-tcpi-in-project-cost-management/