EAC (Estimate at Completion) is a key concept in Earned Value Management (EVM) used in the Project Management to forecast the total cost of a project based on current performance. It helps determine how much the project is expected to cost when it is finished. EAC estimates the total project cost at completion based on the project’s performance up to a given point in time.
EAC Formulas and When to Use Each
There are four primary formulas for calculating EAC. Each is used under different assumptions about project performance:
Formula 1: EAC = AC + (BAC – EV)
Use this if future work will continue as planned, with no change in performance efficiency.
AC = Actual Cost
BAC = Budget at Completion
EV = Earned Value
Assumes past cost overruns were one-time and won’t affect future work.
Formula 2: EAC = BAC / CPI
Use this if current cost performance (CPI) is expected to continue in the future.
CPI = Cost Performance Index = EV / AC
Best when poor (or good) cost performance trends are expected to persist.
Formula 3: EAC = AC + [(BAC – EV) / (CPI × SPI)]
Use when both cost and schedule performance will impact remaining work.
SPI = Schedule Performance Index = EV / PV
PV = Planned Value
Useful in complex projects where delays are affecting cost.
Formula 4: EAC = AC + Bottom-up ETC
Use this when original estimates are no longer valid, and you need a completely new estimate for remaining work.
ETC = Estimate to Complete (re-estimated from scratch)
Best when scope changes or unexpected risks make prior performance irrelevant.
<< Marco