Cost Completion: Estimate at Completion and Estimate to Complete

PMBOK v8 Definition

Estimate at Completion (EAC) is the expected total cost of completing all work, expressed as the sum of the actual cost to date and the estimate to complete. Estimate to Complete (ETC) is the expected cost to finish all the remaining project work. Both are cost forecasts used in earned value management (EVM) to determine if the project is within defined tolerance ranges for the budget and to identify any necessary change requests.

Why It Matters for the Exam

This concept appears frequently on the PMI exam in earned value management questions, typically asking candidates to calculate EAC or ETC based on project performance data. It is tested in both formula-based calculation questions and conceptual questions about interpreting project cost performance. Understanding EAC and ETC is essential for the Cost Management knowledge area within the Monitoring and Controlling Process Group.

Key Points to Remember (for the exam)

• EAC Formula: EAC = AC + ETC (The expected total cost of completing all work expressed as the sum of the actual cost to date and the estimate to complete)

• ETC Definition: The expected cost to finish all the remaining project work (not the total project cost)

• Key Relationship: EAC = AC + ETC (this is the fundamental relationship tested on the exam)

• Common Confusion: EAC is NOT the same as BAC. BAC is the total planned budget (budget at completion), while EAC is the forecasted total cost based on actual performance.

• Calculation Basis: EAC is calculated based on the project's past performance to determine if the project is within defined tolerance ranges for the budget

• Documentation: A calculated EAC value is documented and communicated to stakeholders

• Forecast Purpose: Cost forecasts (EAC and ETC) are used to determine if the project is within defined tolerance ranges for the budget and to identify any necessary change requests

Typical PMI Exam Example

A project has a budget at completion (BAC) of $100,000. After 6 months, the actual cost (AC) is $45,000 and the earned value (EV) is $40,000. The project manager calculates the estimate to complete (ETC) as $60,000. What is the estimate at completion (EAC)?

Answer: EAC = AC + ETC = $45,000 + $60,000 = $105,000

PMI Exam Traps

• Trap: Confusing EAC with BAC Reality: BAC is the total planned budget (budget at completion), while EAC is the expected total cost of completing all work expressed as the sum of the actual cost to date and the estimate to complete

• Trap: Thinking ETC equals the remaining budget Reality: ETC is the expected cost to finish all the remaining project work, which may differ from the remaining planned budget if performance is not on track

• Trap: Forgetting that EAC includes actual costs already incurred Reality: EAC = AC + ETC, meaning EAC always includes all costs incurred to date, not just future costs

• Trap: Assuming EAC is always calculated the same way Reality: The formula EAC = AC + ETC is the fundamental definition, but the calculation of ETC can vary based on whether the project expects future performance to be similar to past performance

Important PMI Connections

Quick Review Questions

1. What is the formula for calculating Estimate at Completion (EAC)?

2. How does Estimate to Complete (ETC) differ from Estimate at Completion (EAC)?

3. If a project has an AC of $50,000 and an ETC of $30,000, what is the EAC?

4. What is the purpose of calculating cost forecasts like EAC and ETC?

5. What information must be documented and communicated to stakeholders regarding cost forecasts?

PMBOK v8 Reference

Section 7.4 - Control Costs (Cost Forecasts subsection) and the Glossary definitions for Estimate at Completion (EAC) and Estimate to Complete (ETC)