Estimate at Completion (EAC)

How EAC Works

Estimate at Completion is an earned value forecasting metric that predicts what the project will cost when it is finished, based on actual performance data rather than the original budget estimate. EAC replaces the question “what did we budget?” with the question “what will it actually cost?” The difference between EAC and the original Budget at Completion (BAC) tells the project manager whether the budget needs to be revised.

There are four standard EAC formulas, each based on different assumptions about future performance. Choosing the right formula depends on whether the project manager believes current cost performance will continue, whether future work will proceed at the originally planned rate, or whether a completely new estimate is needed.

The Four EAC Formulas

Formula 1: EAC = BAC / CPI. This assumes current cost efficiency will continue for the remainder of the project. It is the most commonly used formula and the most reliable when CPI has stabilized (after 20% completion). If BAC is $500,000 and CPI is 0.90, EAC = $555,556.

Formula 2: EAC = AC + (BAC minus EV). This assumes remaining work will be completed at the originally budgeted rate, ignoring current performance. Use this when the cost variance was caused by a one time event (a vendor overcharge, an unexpected expense) that will not recur.

Formula 3: EAC = AC + (BAC minus EV) / (CPI x SPI). This accounts for both cost and schedule performance on remaining work. Use it when the project is both over budget and behind schedule, and the schedule pressure is increasing costs (overtime, additional resources to recover).

Formula 4: EAC = AC + bottom up ETC. This replaces the formula based forecast with a new bottom up estimate of remaining work. Use it when conditions have changed so fundamentally that historical performance is no longer predictive (major scope change, team restructure, technology pivot).

When to Calculate EAC

Calculate EAC at every performance reporting period alongside CPI and SPI. Compare EAC to BAC to determine the projected overrun or underrun. Report the variance to the project sponsor and stakeholders. If EAC significantly exceeds BAC, the project needs a budget revision, scope reduction, or both.

EAC is required reporting on government contracts using EVM and is standard practice on any project where budget accuracy matters to organizational decision making.

When EAC Is Less Useful

Very early in the project (before CPI stabilizes), formula based EAC can be volatile. Use formula 4 (bottom up re estimate) for early stage forecasting until enough data exists for CPI based predictions. In highly uncertain environments where scope changes frequently, EAC based on historical CPI may not reflect future conditions.