Estimate at Completion (EAC)

Estimate at Completion (EAC) is the most important cost forecasting metric in earned value management. It answers the question: given what we know now about how the project is performing, what do we expect the total cost to be at the end? EAC is calculated in several ways depending on the confidence placed in the project's ability to recover. The simplest formula — EAC = Actual Cost (AC) + Estimate to Complete (ETC) — uses the project team's own revised estimate for the remaining work. The EVM formula — EAC = BAC ÷ CPI — assumes that future work will be performed at the same efficiency as work to date, which tends to be the most statistically reliable forecast after the 20% completion point.

The relationship between EAC and BAC drives the Variance at Completion (VAC = BAC − EAC). A positive VAC means the project is forecast to underspend; a negative VAC means it is forecast to overspend. EAC is the number that clients, sponsors, and finance directors most want to see in cost reports, because it translates the complex EVM metrics into a single bottom-line forecast. However, EAC is only as good as the assumptions behind it: if CPI is being calculated on an EV figure that has been gamed, or if AC is understating true commitment through slow accruals, the EAC will be wrong.

Different EAC formulae give different answers and are appropriate in different circumstances. EAC = BAC ÷ CPI is best when the historical CPI is stable and expected to continue. EAC = AC + (BAC − EV) ÷ (CPI × SPI) accounts for both cost and schedule efficiency and tends to be pessimistic — useful as a worst-case scenario. EAC = AC + bottom-up ETC is best when there has been a specific disruption event that makes historical performance a poor guide to the remaining work. Presenting more than one EAC calculation — with the assumptions behind each — is better practice than presenting a single figure that conceals the range of uncertainty.