EVM Example Part 3 – Forecasting ETC and EAC

Filed under Tools | Posted by PMStudent

Now, let’s find the ETC and EAC.

From part 1:
PV = $450,000 USD
EV = $420,000 USD
AC = $415,000 USD
BAC = $2,000,000 USD

From part 2:
CV = $5,000 USD
CPI = 1.01
SV = -$30,000 USD
SPI = 0.93

We’ll use the formula for ETC for typical variance, meaning that we expect progress to continue the way it has in the past.

ETC = (BAC – EV) / CPI
ETC = ($2,000,000 USD – $420,000 USD) / 1.01
ETC = $1,564,356 USD

Now for the final cost estimate based on our EVM metrics:

EAC = $415,000 USD + $1,564,356 USD = $1,979,356 USD

So according to our EVM forecast, this project should come in around $20,000 under budget.

What about the schedule? I have never used EVM in practice. [Editor update: I have had experience with EVM now. My view on using EVM for schedule information holds.] I can see it’s merit in terms of cost control especially. For schedule however, I think I would use the SPI and SV merely as extra information when controlling the schedule. My first focus would be the critical path, and an SPI lower than 1 would tell me that perhaps I need to start looking at other tasks as well, before they become risks to the flow of the critical path. I’m sure you could take your 10 months and divide it by 0.93 to get around 10.75 months as your projected TAC (Time At Completion, did I just make that up?), but I wouldn’t use that as a reliable estimate of completion time. I’m sure there are more advanced EVM metrics geared towards schedule control. If they don’t take the critical path into consideration though, they are treating all tasks as equal, which they are not in terms of schedule.