How is Estimate at Completion (EAC) calculated?

Estimate at Completion (EAC) is a key project management metric used to forecast the total expected cost of a project at its conclusion. The formula used to calculate EAC can vary depending on the situation, but the choice involving BAC (Budget at Completion) divided by CPI (Cost Performance Index) accurately reflects a common method of calculation.

In this context, BAC represents the total budget that has been allocated for the project, while CPI provides insight into the cost efficiency of the project work performed to date. The CPI is calculated as Earned Value (EV) divided by Actual Cost (AC). When the project is facing issues that are expected to persist, using the BAC in conjunction with the CPI yields a more realistic forecast of overall project costs by taking into account how efficiently the project is progressing relative to its budget.

Utilizing BAC / CPI for EAC allows project managers to project a potential overrun or underrun in costs associated with the remaining work in a way that aligns with actual performance metrics. This method is crucial when ongoing performance issues are anticipated to continue affecting the project's budget.

Alternative calculations exist; for example, using total Actual Cost to forecast future costs or combining other metrics. However, the choice that utilizes BAC and CPI is the most straightforward and