Estimate to Complete (ETC) is a financial performance index and project management measure that shows the remaining cost you expect to pay in order to complete a project. Together with schedule variance, it can show you the progress of your project. Note that ETC isn’t the final overall expected project budget – this is called Estimate at Completion (EAC). Instead, Estimate to Complete refers to the costs from the present moment until the end of the project; it never includes the project expenditures and actual cost prior to that moment. Therefore, it can change as the project progresses.
Key Facts
- Determine the Estimate at Completion (EAC): The EAC refers to the expected cost of the project as it progresses. You can calculate the EAC using various methods, such as bottom-up cost estimation. This involves adding the actual costs (AC) of the project to the Estimate to Complete (ETC).
- Calculate the Actual Cost (AC): The actual cost is the total cost incurred for the project up to the present moment. This includes all the expenses that have been recorded so far.
- Subtract the Actual Cost (AC) from the Estimate at Completion (EAC): Once you have the EAC and AC, you can subtract the AC from the EAC to calculate the Estimate to Complete (ETC).
ETC = EAC – AC
It’s important to note that the ETC represents the remaining cost you expect to pay in order to complete the project. It does not include the project expenditures and actual cost prior to the present moment. Therefore, the ETC can change as the project progresses.
How to Calculate ETC
To calculate ETC, you can use the following formula:
ETC = EAC – AC
Where:
- ETC = Estimate to Complete
- EAC = Estimate at Completion
- AC = Actual Cost
Determine the Estimate at Completion (EAC)
The EAC refers to the expected cost of the project as it progresses. You can calculate the EAC using various methods, such as bottom-up cost estimation. This involves adding the actual costs (AC) of the project to the Estimate to Complete (ETC).
Calculate the Actual Cost (AC)
The actual cost is the total cost incurred for the project up to the present moment. This includes all the expenses that have been recorded so far.
Subtract the Actual Cost (AC) from the Estimate at Completion (EAC)
Once you have the EAC and AC, you can subtract the AC from the EAC to calculate the Estimate to Complete (ETC).
Conclusion
The ETC is a key cost performance index for every project manager. Together with Estimated Time to Completion, it gives you an opportunity to inspect project progress in terms of time and budget. ETC allows project managers to compare the funding needs for the remaining project scope. You can calculate the ETC for individual tasks as well as the entire project.
Sources:
- https://study.com/academy/lesson/estimate-at-completion-eac-vs-estimate-to-complete-etc.html
- https://www.primetric.com/blog/how-to-calculate-the-estimate-to-complete-etc
- https://pmstudycircle.com/estimate-to-complete-etc-an-another-project-forecasting-tool/
FAQs
What is ETC in project management?
ETC stands for Estimate to Complete. It is a financial performance index that shows the remaining cost you expect to pay in order to complete a project.
How do I calculate ETC?
You can calculate ETC using the following formula:
ETC = EAC – AC
Where:
- ETC = Estimate to Complete
- EAC = Estimate at Completion
- AC = Actual Cost
What is the difference between ETC and EAC?
EAC stands for Estimate at Completion. It refers to the expected total cost of the project at completion. ETC, on the other hand, refers to the estimated cost to complete the remaining work on a project.
Why is ETC important?
ETC is important because it helps project managers track project costs and make informed decisions about project budgets. It also helps project managers identify potential cost overruns and take corrective action.
How can I improve the accuracy of my ETC estimates?
There are a number of things you can do to improve the accuracy of your ETC estimates, including:
- Use historical data to inform your estimates.
- Get input from multiple stakeholders.
- Use a variety of estimation techniques.
- Be conservative in your estimates.
What are some common mistakes people make when calculating ETC?
Some common mistakes people make when calculating ETC include:
- Failing to consider all of the costs associated with the project.
- Being too optimistic in their estimates.
- Not updating their estimates as the project progresses.
What is the difference between ETC and BAC?
BAC stands for Budget at Completion. It is the original budget for the project. ETC, on the other hand, is the estimated cost to complete the remaining work on a project.
How is ETC used in earned value management?
ETC is one of the three main components of earned value management (EVM). The other two components are actual cost (AC) and earned value (EV). EVM is a project management technique that helps project managers track project progress and identify potential problems.