As the project progresses, the project team develops a forecast for the estimate at completion (EAC) that differs from the budget at completion (BAC) based on the projcct performance. Forecasting the EAC involves making estimates or predictions of conditions and events in the project's future based on information and knowledge available at the time of the forecast. Forecasts are generated, updated, and reissued based on work performance information (Section provided as the projcct is cxccutcd and progressed. The work performance information covers the project's past performance and any information that could impact the projcct in the future.

EACs arc typically based on the actual costs incurred for work completed, plus an estimate to complete (ETC) the remaining effort. It is incumbent on the projcct team to predict what it may encounter to perform the ETC, based on its experience to date. The EVM method works well in conjunction with manual forecasts of the required EAC costs. The most common EAC forecasting approach is a manual, bottom-up summation by the projcct manager and projcct team:

• The project manager's bottom-up EAC. This EAC method builds upon the actual costs and experience incurred for the work completed, and requires a new estimate to complete the remaining projcct work. This method may be problematic in that it interferes with the conduct of projcct work. The personnel who arc performing the project work have to stop working to provide a detailed bottom-up ETC of the remaining work. Typically there is no separate budget to perform the ETC, so additional costs are incurred for the project to conduct the ETC. Formula: EAC = AC + bottom-up ETC.

The project manager's manual EAC can be quickly compared with a range of calculated EVM EACs representing various risk scenarios. While EVM data can quickly provide many statistical EACs, only three of the more common methods arc described as follows:

• EAC forecast for ETC work performed at the budgeted rate. This EAC method accepts the actual projcct performance to date (whether favorable or unfavorable) as represented by the actual costs, and predicts that all future ETC work will be accomplished at the budgeted rate. When actual performance is unfavorable, the assumption that future performance will improve should be accepted only when supported by project risk analysis. Formula: EAC = AC + BAC - EV.

• EAC forecast for ETC work performed at the present CPI. This method assumes what the project has experienced to date can be expected to continue in the future. The ETC work is assumed to be performed at the same cumulative cost performance index (CPI) as that incurred by the project to date. Formula: EAC = BAC/cumulative CPI.

• EAC forecast for ETC work considering both SPI and CPI factors. In this forecast, the ETC work will be performed at an efficiency rate that considers both the cost and schedule performance indices. It assumes both a negative cost performance to date, and a requirement to meet a firm schedule commitment by the project. This method is most useful when the project schedule is a factor impacting the ETC effort. Variations of this method weight the CPI and SPI at different values (e.g., 80/20, 50/50, or some other ratio) according to the project manager's judgment. Formula: AC + [(BAC -EV)/(cumulative CPI x cumulative SPI)].

Each of these approaches can be correct for any given project and will provide the project management team with an "early warning" signal if the EAC forecasts are not within acceptable tolerances.

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Project Management Made Easy

Project Management Made Easy

What you need to know about… Project Management Made Easy! Project management consists of more than just a large building project and can encompass small projects as well. No matter what the size of your project, you need to have some sort of project management. How you manage your project has everything to do with its outcome.

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