Estimate at completion and earned value
You will be able to: Distinguish the three forecasts in the product; Compute CPI, SPI, EAC, ETC and VAC from BAC, EV, PV and AC; Read the portfolio colour bands.
- Read not done yet
- Self-check: not taken not done yet
- Lesson complete not done yet
Zeyto Construction & Contracting gives you three ways to see the final cost, and they answer different questions.
- Row forecast: for each item and nature, actual + committed + ETC. The sum is the control view's forecast.
- Earned value EAC: budget at completion divided by the cost performance index. It assumes the cost efficiency so far continues.
- Approved estimate at completion: cost to date plus an estimate to complete that a person types, then an authorised user approves. It drives revenue on the cost basis (next lesson) and must be approved before it counts.
The earned value figures come from the BOQ weights and the ledger. BAC is the sum of the current budget. EV is each row's budget times its progress. AC is the actual cost. PV is BAC times the planned share of the work today from the latest baseline of the schedule.
| Measure | Formula | Our example |
|---|---|---|
| BAC | Sum of the current budget | 850,000 |
| EV | Budget x progress % | 850,000 x 40% = 340,000 |
| AC | Actual cost | 360,000 |
| PV | BAC x planned % | 850,000 x 45% = 382,500 |
| CPI | EV / AC | 0.9444 |
| SPI | EV / PV | 0.8889 |
| EAC | BAC / CPI | 900,000 |
| ETC | EAC - AC | 540,000 |
| VAC | BAC - EAC | -50,000 |
| Cost variance | EV - AC | -20,000 |
| Schedule variance | EV - PV | -42,500 |
With CPI 0.9444 the project is spending about 1.06 for every 1.00 of work done, so the EAC is 900,000, 50,000 above the budget. Against a contract value of 1,000,000 the forecast margin is (1,000,000 - 900,000) / 1,000,000 = 10%.
The colour bands
The portfolio board shows each project as a tile whose big chip is the worst of six checks. Schedule uses SPI: green from 0.95, amber from 0.85, red below. Cost uses CPI in the same bands. Margin is green from 8% and amber from 3%. Cash is the net billed divided by cost to date: green from 1, amber from 0.8. Safety and quality use incident, permit, NCR and RFI rules.
Our project: CPI 0.9444 is amber, SPI 0.8889 is amber, margin 10% is green, and cash is 330,000 / 360,000 = 0.92, amber. The tile is amber overall because the worst check decides.
Walk it through
- Compute CPI, SPI and EAC for your own project with BAC, EV, PV and AC.
- State which band each index falls into.
- In the demo, open the Portfolio board and read the small earned value table on a tile.
Public demo company, sign in as admin / demoAdmin123. Data refreshes nightly.
- Three forecasts: row forecast, CPI-based EAC, approved estimate at completion.
- CPI = EV / AC; SPI = EV / PV; EAC = BAC / CPI.
- The tile colour is the worst of six checks.
Check yourself
4 questions on this lesson. Not timed, not the exam, and you can try again. Score 60% or more, and read the lesson, to complete it.