For BEYOND HORIZON Column

Various Methods to Compute Estimate-AtCompletion

Suhail Iqbal, PE, PgMP, PMP, PMI-RMP, PMI-SP, PMI-ACP, CAPM, PME, MCT, PRINCE2
Practitioner

What are the various methods of computing Estimate At

Completion (EAC) in Earned Value?
For a Project Manager and especially for a PMP, Earned Value
calculations are not new. Almost all of us know about the estimate
forecasts and we utilize these calculations in our projects all the
time. The most commonly used formula to calculate Estimate At
Completion is
EAC=BAC/CPI
Unfortunately, this computation is not that simple. For every
scenario and level of accuracy we may have to use a different
formula. PMI in its standard PMBOK Guide 4th and 5th
Editions gives a number of formula to compute EAC with barely
enough explanation and reasoning, as follows:EAC=BAC/CPI, if CPI is expected to be same for the remainder of the
project
EAC=BAC/CPIC, if cumulative CPI is expected to be same for the
remainder of the project
EAC=BAC/(CPIxSPI), if cumulative effect of CPI and SPI is likely to affect
remainder of the project
EAC=BAC/(0.8xCPI+0.2xSPI), if a ratio of CPI and SPI is collectively likely
to affect remainder of the project
EAC=AC+BAC-EV, if future work will be accomplished at the planned rate
EAC=AC+Bottom-up ETC, if the initial plan is no more valid
EAC=AC+((BAC-EV)/CPIC), probably the best ever way to find EAC
EAC=AC+((BAC-EV)/(CPIxSPI)), if both CPI and SPI affect the remainder of
the work
EAC=AC+((BAC-EV)/(CPICxSPIC)), If cumulative values CPIC and SPIC
affect remainder of the work
EAC=AC+((BAC-EV)/((0.8xCPIC)+(0.2xSPIC))), if remainder of the work is
affected by CPIC and SPIC in a specific ratio like 80:20
How can you predict the Estimated Duration of the project, looking at past
Earned Value variables?
There are at least three methods.

Simplest way would be to divide the project duration with SPI.

Estimated Time for Completion = EtAC= Total Planned Duration /
SPI
But it might be important to do trend analysis and try the impact
of cumulative SPI if you have a history of varied performances.
Cumulative SPI or SPIC= (EV1+EV2+....+EVn)/(PV1+PV2+....
+PVn)
So your Estimated Time = EtAC = BAC/SPIC
If you want to be further accurate about your estimated duration
then find the estimated time to do the remaining work first.
Estimated Time to complete Remaining Work = EtTC = (BACEV)/SPIC
Estimated Time for Completion of the Project = EtAC = Time
Spend so far + EtTC
Another dimension and the most accurate method to calculate
the Estimated Time for Completion of the Project would be to
translate the effect on time axis graphically.

New Perspectives from Bayesian Approach

Refer to the Research Paper "A Bayesian Approach to Improve
Estimate at Completion in Earned Value Management" by Fanco
Caron, Fabrizio Ruggeri and Alessandro Merli in Project
Management Journal of Feb 2013.
The research mostly agrees with what we have already discussed
with a little bit more and better explanation and reasoning. They
have also justified a progressive CPI and SPI which is the basis of
their research.
I will once again list down various methods in order of importance
from lowest to highest, with the reasoning given in this research
paper. According to the paper, two new terms are introduced SAC
(Schedule At Completion) and SCI (Schedule Cost Index) = CPI x
SPI. Remember EtAC means Estimated time at Completion.

Ordered List of Methods

APPLICATION OF AUTOMATIC ADJUSTMENT

Method 1. EAC=BAC & EtAC=SAC
There will be NO effect of cost and schedule variances or
performance indices as deviations registered during the project
will be absorbed by suitable corrective measures. Whatever has
gone well or wrong will be automatically adjusted and the overall
project will complete as per original plan.
VARIANCES
Based on the Cost and Schedule variances, we can predict EAC
(Estimate at Completion), considering there will be no more
variances in the project.
CV = EV-AC
SV = EV-PV
APPLICATION OF VARIANCES
Method 2. EAC=BAC-EV & EtAC=SAC-SV
The deviations CV and SV reported at any point in time will not
affect the rest of the project. Whatever has gone well or wrong
will not be repeated and the rest of the project will go as per plan.
INDICES
In the previous two methods, there was no application of any
indices and EAC was calculated based on no change in the plan.
In earned value calculations we have two indices CPI (Cost
Performance Index) and SPI (Schedule Performance Index).
CPI=EV/AC & SPI=EV/PV
Sometimes we used the combined or joint effect of these two
indices together and for that a new index has been developed SCI
(Schedule Cost Index) which is simple multiplication if these two
indices CPI and SPI.
SCI=CPIxSPI

APPLICATION OF INDICES ON WHOLE PROJECT

Method 3. EAC=BAC/CPI & EtAC=SAC/SPI
The indices CPI and SPI reported at a point in time will remain
constant until project completion. Whatever has gone well or
wrong at the point of taking the readings, will be repeated for the
whole project.
Method 4. EAC=BAC/SCI=BAC/(CPIxSPI) & EtAC=SAC/SCI=SAC/
(CPIxSPI)
The joint effect of cost and schedule performance will be
considered in calculating the estimate at completion. Whatever
has gone well or wrong in cost and schedule performance at the
point of taking the readings, will be jointly affecting the whole
project.
CUMULUTAIVE INDICES
As the current vale of CPI and SPI may not be a true
representative of all past performances and therefore cannot be
applied squarely to predict future, therefore cumulative indices
CPIC (Cost Performance Index Cumulative) and SPIC (Schedule
Performance Index Cumulative) were to be found.
CPIC=((EV1+EV2+....+EVn)/(AC1+AC2+....+ACn))
SPIC=((EV1+EV2+....+EVn)/(PV1+PV2+....+PVn))
As we will require some new variables for calculating EtAC
(Estimated Time At Completion), following terms are introduced
here:TN= Time Now
ES= Earned Schedule

APPLICATION OF CUMULATIVE INDICES ON REMAINING WORK

Method 5. EAC=AC+(BAC-EV)/CPIC
where CPIC=((EV1+EV2+....+EVn)/(AC1+AC2+....+ACn))
& EtAC=TN + (SAC - ES)/SPIC

where TN= Time Now, ES= Earned Schedule, and

SPIC=((EV1+EV2+....+EVn)/(PV1+PV2+....+PVn))
Future performance significantly differs from past performance so
remaining work is affected by cumulative performance indices.
The trend of whatever indices we historically had on this project
will be projected on the rest of the project.
Method 6. EAC=AC+(BAC-EV)/(CPICxSPIC)
where CPIC=((EV1+EV2+....+EVn)/(AC1+AC2+....+ACn))
and SPIC=((EV1+EV2+....+EVn)/(PV1+PV2+....+PVn))
& EtAC=TN + (SAC - ES)/(CPICxSPIC)
where TN= Time Now, ES= Earned Schedule, and
Future performance significantly differs from past performance so
remaining work is affected by the joint effect of cumulative
performance indices. The joint trend of whatever indices we
historically had on this project will be projected on the rest of the
project.
Method 7. EAC=AC+(BAC-EV)/(0.8xCPIC+0.2xSPIC)
where CPIC=((EV1+EV2+....+EVn)/(AC1+AC2+....+ACn))
and SPIC=((EV1+EV2+....+EVn)/(PV1+PV2+....+PVn))
& EtAC=TN + (SAC - ES)/(0.8xCPIC+0.2xSPIC)
where TN= Time Now, ES= Earned Schedule, and
Future performance significantly differs from past performance so
remaining work is affected by the joint effect of cumulative
performance indices CPIC:SPIC in the ratio of 80:20. The joint
trend of whatever indices we historically had on this project will
be projected on the rest of the project on the 80:20 ratio. The
ratio could be altered to 70:30, 60:40 or whatever combination.
CURRENT CUMULATIVE INDICES
To further make the forecast more accurate, it was analysed that
the cumulative indices do represent all the previous periods but
still last few periods are more predictive of future performance
than the older records. Therefore indices CPIcc (CPI Current
Cumulative) and SPIcc (SPI Current Cumulative) were introduced.

CPIcc=((EVn+EV(n-1)+EV(n-2)/(ACn+AC(n-1)+AC(n-2)))
SPIcc=((EVn+EV(n-1)+EV(n-2))/(PVn+PV(n-1)+PV(n-2)))
These indices take into account the latest 3 or 4 periods and no
further backwards. The calculations here show only three periods
but they could be extended to more periods.

APPLICATION OF ONLY CURRENT CUMULATIVE INDICES ON

REMAINING WORK
Method 8. EAC=AC+(BAC-EV)/CPIcc
where CPIcc=CPI Current Cumulative
CPIcc=((EVn+EV(n-1)+EV(n-2)/(ACn+AC(n-1)+AC(n-2)))
& EtAC=TN + (SAC - ES)/SPIcc
where TN= Time Now, ES= Earned Schedule, and SPIcc = SPI
Current Cumulative
SPIcc=((EVn+EV(n-1)+EV(n-2))/(PVn+PV(n-1)+PV(n-2)))
Future performance significantly differs from past performance so
remaining work is affected by current cumulative performance
indices. The trend of latest indices we had on this project will be
projected on the rest of the project.
Method 9. EAC=AC+(BAC-EV)/(CPIccxSPIcc)
where CPIcc=((EVn+EV(n-1)+EV(n-2)/(ACn+AC(n-1)+AC(n-2)))
and SPIcc=((EVn+EV(n-1)+EV(n-2))/(PVn+PV(n-1)+PV(n-2)))
& EtAC=TN + (SAC - ES)/(CPIccxSPIcc)
where TN= Time Now, ES= Earned Schedule, and
Future performance significantly differs from past performance so
remaining work is affected by the joint effect of current
cumulative performance indices. The joint trend of latest indices
we had on this project will be projected on the rest of the project.
Method 10. EAC=AC+(BAC-EV)/(0.8xCPIcc+0.2xSPIcc)
where CPIcc=((EVn+EV(n-1)+EV(n-2)/(ACn+AC(n-1)+AC(n-2)))
and SPIcc=((EVn+EV(n-1)+EV(n-2))/(PVn+PV(n-1)+PV(n-2)))

& EtAC=TN + (SAC - ES)/(0.8xCPIcc+0.2xSPIcc)

where TN= Time Now, ES= Earned Schedule, and
Future performance significantly differs from past performance so
remaining work is affected by the joint effect of current
cumulative performance indices CPIcc:SPIcc in the ratio of 80:20.
The joint trend of latest indices we had on this project will be
projected on the rest of the project on the 80:20 ratio. The ratio
could be altered to 70:30, 60:40 or whatever combination.
PROGRESSIVE INDICES
To be on the cutting edge, we can use the progressive indices,
just taking into account the current and last values. Apply
following values of CPIp (CPI Progressive) and SPIp (SPI
Progressive)
CPIp=(EVn-EV(n-1))/(ACn-AC(n-1))
SPIp=(EVn-EV(n-1))/(PVn-PV(n-1))
These progressive indices contribute towards formulating
Bayesian Approach, establishing a monthly trend.

APPLICATION OF P|ROGRESSIVE INDICES ON REMAINING WORK

Method 11. EAC=AC+(BAC-EV)/CPIp
where CPIp=CPI Progressive
CPIp=(EVn-EV(n-1))/(ACn-AC(n-1))
& EtAC=TN + (SAC - ES)/SPIp
where TN= Time Now, ES= Earned Schedule, and SPIp = SPI
Progressive
SPIp=(EVn-EV(n-1))/(PVn-PV(n-1))
Future performance significantly differs from past performance so
remaining work is affected by current and last performance
indices. The trend of latest two indices we had on this project will
be projected on the rest of the project.
Method 12. EAC=AC+(BAC-EV)/(CPIpxSPIp)
where CPIp=(EVn-EV(n-1))/(ACn-AC(n-1))
and SPIp=(EVn-EV(n-1))/(PVn-PV(n-1))

& EtAC=TN + (SAC - ES)/(CPIpxSPIp)

where TN= Time Now, ES= Earned Schedule, and
Future performance significantly differs from past performance so
remaining work is affected by the joint effect of last two
performance indices. The joint trend of latest two indices we had
on this project will be projected on the rest of the project.
Method 13. EAC=AC+(BAC-EV)/(0.8xCPIp+0.2xSPIp)
where CPIp=(EVn-EV(n-1))/(ACn-AC(n-1))
and SPIp=(EVn-EV(n-1))/(PVn-PV(n-1))
& EtAC=TN + (SAC - ES)/(0.8xCPIp+0.2xSPIp)
where TN= Time Now, ES= Earned Schedule, and
Future performance significantly differs from past performance so
remaining work is affected by the joint effect of last two
performance indices CPIp:SPIp in the ratio of 80:20. The joint
trend of latest two indices we had on this project will be projected
on the rest of the project on the 80:20 ratio. The ratio could be
altered to 70:30, 60:40 or whatever combination.

APPLICATION OF GRAPHICAL METHOD FOR EtAC

Method 14. The most accurate method to calculate the EtAC
(Estimated Time for Completion) of the Project would be to
translate the effect on time axis graphically.
On the Cost baseline graph, draw a line originating from the
current EV horizontally to the cost baseline. It would be
backwards if you are ahead of schedule and forwards if you are
behind schedule. Record the exact point on cost baseline where
the line intersects it and draw a line perpendicularly downwards
to see the exact time when this much work should have been
completed. Note the difference between this point and the current
time, call it x. You are this much behind or ahead of schedule in
terms of time. Time which has so far been spent, call it y, and the
total planned time for the project, call it z. Now find if you are x
time behind/ahead of schedule in y time then how much
behind/ahead of schedule you would be for z time? This will give
you a time duration which if added/subtracted from the total
planned time of the project (z) would give you EtAC.

I think this pretty much concludes the discussion on ESTIMATE-ATCOMPLETION.