Construction Project Management Best Practice – Estimate at Completion – Financial forecasting
Managing projects involves keeping track of various metrics.
Both managers and clients want information about how a project’s progress is forecasted to go. This includes both the expenses and the amount of time needed to complete it.
To find out whether a project can be completed within the authorized Budget at Completion (BAC) and Planned Completion Date (PCD), two other metrics are needed. These are the Estimated Completion Date (ECD) and Estimate at Completion (EAC). With these figures, managing a project is much easier.
What is Estimate at Completion? Why is it Valuable?
Estimate at completion or EAC can be thought of as the sum of a contract’s actual costs to-date and the company’s best estimate of the resources required to finish the remaining work in the project. Therefore, the formula for EAC is often listed as Actual Cost of Work Performed (ACWP) + Estimate to Complete (ETC.)
Estimate at Completion is valuable because it provides insight as to how well a project is progressing according to forecasts. Both the budget and the schedule can be considered when it comes to EAC. Any discrepancies can provide insight into uncertainties and alert management when changes could be beneficial.
What Makes EAC Vary?
EAC can be a tough metric to estimate accurately without prior experience, as it can fluctuate based on a number of factors. These include things like the amount of remaining work, perceived risks, and the information available to create the report.
How EAC is Used for Different Reports
EAC is an important metric that may be used in various types of reports. For example, both the Contract Performance Report and the Integrated Program Management Report will use a separate EAC to get accurate results. Realistic EAC measurement is also important for a good public image. Inaccurate reporting of this metric can lead an organization to earn a bad reputation, potentially costing them future clients.
The Sarbanes-Oxley Act has changed the way reporting is regulated for corporate and financial entities. Public statements can influence the investments of other parties, so it is important that these be accurate. Falsifying records can cause an organization to incur penalties.
Finding Answers Concerning the Current Project
An accurate EAC report can provide managers with the information they need to answer important questions. These can include the remaining costs for a project and whether they are sufficient, as well as how the progress of the project is going according to projections. Accurate EAC data can provide information not only to managers, but to customers and stockholders as well.