# Estimate at Completion (EAC) vs. Estimate to Complete (ETC)

Instructor: Saranya Ramachandran

Saranya has a Bachelors in Science focused on Electronics and Telecommunication and a Masters in Business Administration. She has 8 years of Project Management Experience and is PMP Certified.

Estimate at Completion and Estimate to Complete are forecasting techniques to determine if the project costs are on track. In this lesson, we'll look at the difference between Estimate at Completion (EAC) and Estimate to Complete (ETC) and explore methods for calculating each.

## EAC vs. ETC

When a project is initiated, a certain amount of money is allocated to get it done. This amount of money is known as the budget. The budget is an estimation at the beginning of the project. However, as the project proceeds, there is new information available that might change the total amount of money needed. Estimate at Completion is used for forecasting the amount of money at the end of the project. Estimate to Complete is the amount of money needed to finish the project at any point.

## Calculation Methods

Consider a project with the following tasks and overall budget of \$90,000

• Design - \$20,000
• Implementation - \$50,000
• Testing - \$10,000
• Close Out - \$10,000

### Bottom-up Cost Estimation

The first method to calculate Estimate to Complete is to use bottom-up cost estimation. The bottom-up cost estimation calculates the budget from the bottom, meaning from the lowest-level of the tasks. In this example, the bottom-up cost estimation is \$90,000, which is the Estimate to Complete.

Let's assume that the design stage has been completed and calculate the Estimate to Complete using the bottom-up cost estimation technique:

\$70,000 (Estimate to Complete) = \$50,000 (implementation) + \$10,000 (testing) + \$10,000 (close out)

Now let us consider that as the project proceeded, additional items were added to testing, which increased the testing budget to \$25,000. Let's calculate the Estimate to Complete using bottom-up cost estimation.

\$85,000 (Estimate to Complete) = \$50,000 (implementation) + \$25,000 (new testing budget) + \$10,000 (close out)

### Estimate to Complete Formula

The other way to calculate Estimate to Complete is by using the following formula:

Estimate to Complete = Estimate at Completion - Actual Cost

If there were no additional changes to the project, the Estimate at Completion is equal to the budget. The overall budget in our example is \$90,000. Actual cost is the money spent to date.

\$70,000 (Estimate to Complete) = \$90,000 (Estimate at Completion) - \$20,000 (actual cost)

Now let us consider that as the project proceeded, additional items were added to testing, which increased the testing budget from \$10,000 to \$20,000. Let's calculate the Estimate at Completion using Estimate to Complete Formula.

\$100,000 (Estimate at Completion) = \$20,000 (design) + \$50,000 (implementation) + \$20,000 (new testing budget) + \$10,000 (close out)

With our new Estimate at Completion, we can calculate the Estimate to Complete.

\$80,000 (Estimate to Complete) = \$100,000 (Estimate at Completion) - \$20,000 (actual cost)

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