6 – Defining the different Estimates at Completion?
Defining the different Estimates at Completion
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In this video, we will be defining the different estimates at completion
Projects Manager’s Estimate at Completion, Mathematical Estimate at Completion or optimistic estimate, probable estimate and the pessimistic estimate
00:35 – Introducing the EVM Parameters
02:50 – SPI, CPI, CSI calculations
05:10 – When does the project end using the SPI?
07:40 – What will the project cost at the end? Estimates at Completion (EAC)
10:00 – Determining the Basic formula for the Estimate at Completion
12:40 – Different estimates at completion
13:05 – The project Manager’s Estimate
13:40 – The Mathematical Estimate = Optimistic Estimate
16:15 – The CPI-based Estimate = Probable Estimate
17:10 – The CSI-based Estimate = Pessimistic Estimate
18:20 – Equivalence of the CPI-based estimates
20:35 – Calculation of the EACs
26:10 – Conclusion
After defining the different performance indices like SPI, CPI, and CSI, we can use them to calculate the different estimates at completion. But first, we have to start by defining the different estimates at completion.
The first step is to calculate the SPI, CPI, and CSI with the earned value data that we obtained.
Using the graph and extrapolating the Earned Value creation (extending the line), it is possible to determine the expected end time of the project graphically but also mathematically. Remember that the project ends whenever all the scope has been completed and EV = BAC
Based on this, it is possible to determine the expected completion time of the project.
Now, we extrapolate the AC-line until we reach the end-time of the project and the intersection with the t-coordinate gives us the EAC for the project. We will prove later that this is equal to the probable estimate. Using the linear equations, it is possible to derive the formula for the EAC.
Now, we can define the different estimates at completion:
1. Project Manager’s Estimate
Although the project manager is the main source for the project status information, it is necessary to verify if the estimate given can be confirmed by the other estimates at completion (expected to be in between the optimistic and pessimistic estimates)
2. The Mathematical Estimate also called the Optimistic Estimate
Here we assume that the remaining deliverables are created with a CPI = 1 or costs equal to the planned costs. In this case, the reasons for cost variances have been resolved.
EAC(Math) = AC + (BAC – EV)
3. The CPI-based Estimate also called the Probable Estimate
In this case, we assume that the future cost performance will be the same as the past performance. This results in the fact that the remaining value to be created (BAC – EV) has to be divided by the CPI
EAC(CPI) = AC + (BAC – EV)/CPI
4. The CSI-based Estimate also called the Pessimistic Estimate
In the worst-case scenario, we expect the cost of the remaining value to be earned will be proportional to the CSI. Now the remaining value to be earned has to be divided by the CSI
EAC(CSI) = AC + (BAC – EV)/CSI
When we looked at the graph at the beginning of the video where we were graphically determining the end of the project and its estimate at completion, we found a simple formula for the EAC:
EAC = BAC/CPI
Now we want the verify if this formula is equal to the one we determining in point 3. before?
We want to prove:
AC + (BAC – EV)/CPI = BAC/CPI
To finish the video, we will calculate the different values and compare the Project Managers Estimate with the other estimates
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