Estimate at completion, or EAC, is the forecasted total cost of completing all authorized work. In earned value management, it combines the actual cost incurred through the status date with the estimated cost of the remaining work.
The basic relationship is:
EAC = Actual Cost + Estimate to Complete
An EAC is not simply the original budget adjusted for what the program has spent. It is a forward-looking management forecast. A credible EAC considers actual performance, remaining scope, schedule conditions, resource requirements, material commitments, risks and realistic assumptions about future efficiency.
What Is Estimate at Completion?
The Department of Energy project management lexicon defines EAC as the actual cost of completed work plus the estimated cost to finish the remaining authorized work. The Defense Acquisition University also presents the relationship as cost to date plus the estimate of work remaining in its Earned Value Management Gold Card.
In current earned value terminology:
- AC is actual cost through the current reporting period.
- ETC is estimate to complete, or the forecasted cost of the remaining work.
- EAC is the total forecasted cost at completion.
- BAC is budget at completion, or the approved budget for the work.
- VAC is variance at completion, calculated as BAC minus EAC.
Therefore, an EAC above BAC forecasts an overrun and produces a negative VAC. An EAC below BAC forecasts an underrun and produces a positive VAC. For more detail on the baseline side of this comparison, see Budget at Completion explained.
EAC, ETC, BAC and VAC Are Different Measures
These terms answer different management questions. Confusing them can produce misleading forecasts and variance explanations.
- BAC asks: How much budget did management assign to the authorized work?
- AC asks: How much cost has the program recorded so far?
- ETC asks: How much more will the remaining work cost?
- EAC asks: What will the total authorized work cost when complete?
- VAC asks: How far above or below budget does the program expect to finish?
BAC is a budget value, while EAC is a forecast. A program should not change its performance measurement baseline merely because its forecast has deteriorated. Instead, the unfavorable forecast remains visible through VAC unless an authorized baseline action applies.
Common Estimate at Completion Formulas
The most useful EAC formula depends on the forecast assumption. No single equation fits every program condition. As a result, analysts often calculate several independent EACs and compare them with the management forecast.
1. Management or Bottom-Up EAC
EAC = AC + ETC
This is the fundamental EAC relationship. The team estimates the remaining labor, material, subcontract, overhead and other costs at the appropriate level of the work breakdown structure. It then adds that ETC to actual cost.
A bottom-up EAC can reflect conditions that an index formula cannot see. For example, it may incorporate a negotiated supplier quote, a known engineering redesign, an updated staffing plan or the retirement of a specific technical risk.
However, a detailed estimate is not automatically credible. Its assumptions must agree with the remaining scope, resource-loaded plan, current schedule dates and risk register. The GAO Cost Estimating and Assessment Guide recommends comparing a comprehensive EAC with independent forecasts and historical performance indices.
2. Future Work Performs to the Original Budget Rate
EAC = AC + (BAC − EV)
This formula assumes the cost variance incurred to date will not continue into the remaining work. In other words, the remaining scope will cost exactly its remaining budget.
Use this case only when evidence shows that the past variance was isolated and nonrecurring. For example, a one-time accounting adjustment may not affect future efficiency. However, recurring labor inefficiency, continuing rework or sustained supplier problems would not support this assumption.
3. Current Cost Efficiency Continues
EAC = AC + (BAC − EV) ÷ CPI
Because the cumulative cost performance index is CPI = EV ÷ AC, this formula can also be expressed as:
EAC = BAC ÷ CPI
This forecast assumes the program will perform the remaining work at its demonstrated cumulative cost efficiency. It is often a useful analytical benchmark when the conditions that produced the cost performance index are expected to continue.
For example, a cumulative CPI of 0.80 means the program has earned only $0.80 of budgeted value for every $1.00 spent. Forecasting the remaining work at an efficiency of 1.00 would require clear evidence of a major improvement. See CPI versus SPI for additional interpretation of these indices.
4. Cost and Schedule Efficiency Affect the Remaining Work
EAC = AC + (BAC − EV) ÷ (CPI × SPI)
This formula assumes both cost and schedule performance will influence the cost of the remaining work. It often produces a higher EAC when the program is both over cost and behind schedule.
However, the formula is not universally appropriate. Earned value schedule variance and SPI eventually return to zero and 1.00 respectively when all work is complete. Therefore, analysts should use schedule-based cost adjustments with judgment. They should also determine whether the delayed work affects critical or near-critical paths and whether schedule recovery will create overtime, added staffing, extended facilities or other costs.
A Practical EAC Example
Assume the fictional Sentinel Ground Support program reports the following cumulative data at its month-end status date:
- BAC: $50 million
- EV: $20 million
- AC: $25 million
- CPI: 0.80
- SPI: 0.90
- Bottom-up ETC: $39 million
The program has $30 million of budgeted work remaining because BAC minus EV equals $30 million.
Forecast if the Remaining Work Meets Its Budget
EAC = $25M + $30M = $55M
This result forecasts a $5 million overrun. However, it assumes the remaining work will perform at a 1.00 cost efficiency despite the cumulative CPI of 0.80. The team would need strong evidence to support that recovery.
Forecast if Current Cost Efficiency Continues
EAC = $25M + ($30M ÷ 0.80) = $62.5M
The resulting VAC is $50 million minus $62.5 million, or negative $12.5 million. This estimate carries the program’s cumulative cost efficiency into the remaining work.
Forecast if Cost and Schedule Conditions Continue
EAC = $25M + ($30M ÷ 0.72) = approximately $66.7M
Here, 0.72 is the product of the 0.80 CPI and 0.90 SPI. This result may provide a useful upper analytical bound if schedule delays are driving additional costs.
Management’s Bottom-Up Forecast
EAC = $25M + $39M = $64M
The bottom-up EAC falls between the CPI and composite forecasts. That position does not prove it is correct, but it gives the program a reasonable starting point for review. Management should explain why the remaining $39 million is sufficient and show how it aligns with scheduled work, staffing, supplier commitments and identified risks.
How to Test Whether an EAC Is Realistic
A good review does more than check the arithmetic. Program controls should challenge the assumptions behind the ETC and determine whether the forecast agrees with the current execution plan.
Compare TCPI with Demonstrated Performance
The to-complete performance index measures the cost efficiency required on the remaining work to achieve a target EAC:
TCPI to EAC = (BAC − EV) ÷ (EAC − AC)
For the $64 million management EAC in the example:
TCPI = $30M ÷ ($64M − $25M) = 0.77
A required future efficiency of 0.77 is close to the cumulative CPI of 0.80. Therefore, the management forecast does not depend on an unexplained productivity improvement.
In contrast, finishing at the $50 million BAC would require a TCPI of 1.20. Moving from a historical CPI of 0.80 to a sustained future efficiency of 1.20 would demand compelling evidence. For a fuller discussion, see EVM, TCPI, VAC, ETC and advanced earned value management.
Reconcile the ETC with the Integrated Master Schedule
The remaining cost forecast should reflect the current schedule, not an outdated baseline finish profile. If testing moves six months, the ETC may need additional engineering support, facilities, program management, supplier oversight or escalation.
Accordingly, the schedule must have a valid status date and credible remaining logic. Teams should first status the integrated master schedule correctly, then reconcile forecast dates, resources and costs. A cost forecast that assumes an on-time finish while the driving path shows a substantial delay lacks internal consistency.
Review the Forecast at Lower WBS Levels
Analyze EACs at control account and work breakdown structure levels before relying on the contract total. Favorable performance in one area can mask serious deterioration elsewhere.
Control account managers should explain remaining quantities, staffing, rates, material commitments and technical assumptions. Program controls can then aggregate those forecasts and identify inconsistencies across shared resources, schedules and indirect-cost assumptions.
Compare More Than One Forecast
GAO identifies developing a range of EACs as a useful management practice. Therefore, compare the bottom-up EAC with CPI-based, schedule-adjusted and other independent forecasts. A persistent gap between management’s forecast and statistical results requires an explanation, not an automatic substitution of one number for another.
Common EAC Failure Modes
- Holding EAC at BAC without evidence: A forecast should not remain equal to the budget merely because management has not approved an overrun.
- Ignoring sunk cost variances: Future performance does not erase a cumulative cost overrun unless later work achieves a genuine offsetting underrun.
- Using one formula mechanically: Each equation contains an assumption. The analyst must decide whether that assumption fits the remaining work.
- Forecasting from unreliable EVMS data: Incorrect earned value, missing actuals or stale schedule status will distort the result.
- Failing to include known remaining scope: The ETC must cover all authorized work, including incomplete prior-period effort and expected rework.
- Using optimistic staffing ramps: A forecast may be mathematically complete yet operationally impossible if hiring, clearances or specialized skills are unavailable.
- Disconnecting cost and schedule forecasts: The ETC should account for the cost effects of credible forecast dates.
- Treating management reserve as automatic future cost: Management reserve is budget for in-scope, unplanned work. It is not a substitute for estimating known remaining costs.
Is EAC a Contractual Requirement?
EAC itself is a standard EVMS forecast, but the exact reporting obligation comes from the contract. FAR 34.201 requires monthly EVMS reports for contracts to which EVMS applies. In addition, FAR 52.234-4 requires the contractor to use the applicable EVMS and submit reports in accordance with the contract.
Neither citation establishes a universal EAC calculation that every contractor must use in every situation. The applicable solicitation, contract clause, Contract Data Requirements List, data item description and agency tailoring determine the required content and reporting detail. Programs should verify those documents rather than treating a common forecasting convention as a contractual rule.
What a Useful EAC Should Tell Management
A credible estimate at completion gives management an early view of the likely final cost. More importantly, it explains why that outcome is expected and what assumptions could change it.
The strongest EACs connect actual performance with the remaining technical plan. They also align the ETC with the schedule, resource forecast, risks and corrective actions. When those elements agree, the EAC becomes more than an EVMS metric. It becomes a practical decision tool for funding, staffing, supplier management and contract execution.
For broader context on how EAC fits with planned value, earned value, actual cost and the performance measurement baseline, see the complete guide to earned value management.
Estimate at Completion FAQ
Can EAC be lower than actual cost?
Normally, no. Because EAC equals actual cost plus the remaining ETC, an EAC below actual cost would require a negative ETC. Such a condition may occur in limited accounting or cost-reversal situations, but it requires investigation.
Does EAC include profit or fee?
EAC in EVMS generally forecasts cost rather than contract price or fee. However, users should confirm the definitions and reporting instructions in the applicable contract and data requirements.
How often should EAC be updated?
The forecast should be reviewed during the regular reporting cycle and updated when current information changes the expected cost of remaining work. A comprehensive bottom-up update may occur less frequently, depending on the program’s procedures and contractual reporting requirements.
Which EAC formula is best?
No formula is always best. Use each formula as a forecast based on a stated assumption. Then compare the results with the bottom-up estimate, historical performance, schedule forecast and remaining risks.