Earned Value Management and Important Concepts |ETC EAC TCPI| #ProjectManagement #PMP #PMI
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Earned Value Management and Important Concepts |ETC EAC TCPI| #ProjectManagement #PMP #PMI |
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Estimate to Complete (ETC)
ETC represents the expected cost required to complete the project.
It measures only the future budget needed to complete the project, not the entire budget (that’s the EAC, next).
It allows the project manager to compare the funding needs to finish the project with funding available.
The ETC can be calculated either for each task or for the whole project. There are two ways to calculate ETC:
Based on past project performance: ETC = (BAC – EV) / CPI
Since each of the input variables (right side of the equation) has been determined prior to this step, the ETC can be calculated either for each task or directly for the whole project.
Based on a new estimateThis is called a Management ETC. This means that a new estimate of the remaining tasks in the project is performed.
In our example task we will calculate the ETC based on the past performance of the project. Once again, we will add a column to the table for ETC.
Future performance will be based on the budgeted cost
If you think the existing variance was a unique event and the rest of the project should go according to plan, simply add the remaining project budget to the actual cost incurred to date (AC).
This method does not assume the project finishes on budget.
Rather it takes into account the one time event and adjusts the whole project plan upward or downward to estimate the final result.
EAC = AC + (BAC – EV)
Variance at Completion (VAC)
The VAC is a forecast of what the variance, specifically the Cost Variance (CV), will be upon the completion of the project.
It is the size of the expected cost overrun or underrun.
In many situations the project manager must request additional funding as early as possible, or at least report the potential for an overrun. The VAC represents the size of this request.
The formula is:
VAC = BAC – EAC= Old Budget – New Budget
This one is relatively simple. If you’ve calculated the EAC you’ve done the big math already and the ‘new budget’ can simply be subtracted from the ‘old budget’ to determine the cost overrun or underrun.
The Variance at Completion is simply a future projected Cost Variance. It has the same units as CV. It is the same type of element.
We will once again add another column to the table:
To Complete Performance Index (TCPI)
The TCPI represents the efficiency level, specifically the CPI, that will make the project finish on time.
It can be a powerful indicator because it is generally easy to ascertain if your people will be as productive as the indicator tells you.
This indicator tends to be a bigger red flag than other indicators.
For example, if it says your people need to be twice as efficient as the schedule, it tends to make you take notice that action needs to be taken.
There are two ways to calculate the TCPI: |
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