Successful Project Management requires the ability to forecast the estimated cost to complete the remainder of the project. Estimate to Complete (ETC) is used to calculate Estimate at Completion (EAC), which is the projected final cost at the completion of the project. Once we know the Estimate at Completion, we can establish the Variance at Completion (VAC), which tells us the variance between what the project was originally projected to cost, as defined in the baseline, versus the current projected costs at completion.
The technique for reporting and calculating Estimate to Complete in Primavera P6 is selected at the Work Breakdown Structure (WBS) level. Some of these options take into consideration schedule delays and budget/cost overruns.
Important formulas related to Estimate to Complete (ETC)
ETC can be calculated utilizing one of the 2 following formulas:
1. ETC = remaining cost for the activity; default setting
B. ETC = [PF*(Budget at Completion – Earned Value Cost)]
PF is the Performance Factor used to calculate Estimate to Complete and there are four options:
- PF = 1 yields an optimistic result
ETC = [PF*(Budget at Completion – Earned Value Cost)] - PF = 1/CPI provides a most likely result.
PF = 1/ (CPI)* (Budget at Completion – Earned Value Cost) - PF = 1/ (CPI * SPI) yields a pessimistic result.
ETC = [1/ (CPI * SPI)] * (Budget at Completion – Earned Value Cost) - PF = user defined value
Important Earned Value Indices:
- Cost Performance Index (CPI) identifies the amount of work accomplished against the dollars actually spent to get the work done and is calculated as CPI = Earned Value Cost/Actual Cost.
- Schedule Performance Index (SPI) measures the physical work accomplished against the amount of work that was planned and is calculated as SPI = Earned Value Cost/Planned Value Cost.
- To Complete Performance Index (TCPI) estimates the cost performance necessary in order for the project to meet the project’s estimate of how much the project will cost when complete (Estimate At Completion or EAC). This is accomplished by calculating how much work is remaining on the project divided by how much money is remaining for the project. Work remaining is calculated as the Budget at Completion (BAC) minus the Earned Value (EV). Remaining money is calculated as Estimate at Completion (EAC) minus the Actual Cost (AC). The formula is TCPI = (BAC – EV ) / (EAC – AC).
This Primavera P6 training tutorial illustrates the various methods for calculating ETC to forecast the performance of the project at completion.
Step 1. The technique for calculating ETC is established at the Work Breakdown Structure (WBS). The first example to be demonstrated is ETC = Remaining cost for the Activity.
Step 2. The activity depicted in the image below has been updated as 25% complete with 8 remaining days & 64 remaining labor hours.
Step 3. The image below depicts a remaining cost of $6400 based upon 64 remaining labor hours at $100 per hour. Notice that the activity layout is displaying ETC of $6400 based upon our selection at the WBS (see step 1). Estimate at Completion (EAC) is $9400 (ETC + Actual Cost of $3000). Variance at Completion (VAC) is ($1400) and is calculated as Budget at Completion $8000 – Estimate at Completion $9400.
To recap:
ETC = Remaining cost of the activity of $6400
EAC = ETC + AC ($6400 + 3000 = $9400)
VAC = BAC – EAC = ($1400); Budget at Completion less Estimate at Completion
Step 4. Now we will demonstrate the calculation of ETC using the following formula:
ETC = PF * (Budget at Completion – Earned Value) where PF = 1
Step 5. Notice the resulting ETC, EAC, and VAC using this formula:
ETC = PF * (Budget at Completion – Earned Value) where PF = 1
This option yields an optimistic forecast of ETC. ETC is actually less than the Remaining Cost for the activity.
Step 6. Now we will try calculating ETC with the following formula:
ETC = PF * (Budget at Completion – Earned Value) where PF = 1/Cost Performance Index (CPI)
Step 7. Notice the ETC, EAC, and VAC using the following formula:
ETC = PF * (Budget at Completion – Earned Value) where PF = 1/CPI
This technique for calculating ETC yields the most likely projection of ETC.
Step 8. The image below depicts the selection of calculating ETC with the following formula:
ETC = PF * (Budget at Completion – Earned Value) where PF = 1/ (CPI * SPI)
Step 9. Notice the ETC, EAC, and VAC using the following formula:
ETC = PF * (Budget at Completion – Earned Value) where PF = 1/ (CPI * SPI)
This technique yields a pessimistic projection of ETC, EAC, and VAC.
Step 10. Display the Activity Usage Profile on the bottom layout to view Earned Value Curves.
Step 11. Use the Activity Usage Profile options to select values to display on the profile.
Interested in learning more about the EVM functionality in Primavera? Click on this link to access our free EVM tutorial guide for Primavera P6 R7. One of the video lessons covers Estimate to Complete. We also cover EVM extensively in our self paced advanced Primavera training course. Click here for a complete list of training available.