Estimate at Completion (EAC)

EAC (Estimate at Completion) is the total forecasted cost a project will incur by the time it is finished, calculated as actual costs to date plus the estimate to complete the remaining work. On a fixed-fee engagement, EAC is the primary indicator of whether the project will deliver profitably or head toward a loss.

The core formula

EAC = Actual cost to date (AC) + Estimate to Complete (ETC)

If a project has consumed $80,000 in labor and expenses and the delivery team estimates $40,000 more to close it out, the EAC is $120,000.

Alternative EAC formulas

When a project shows a consistent cost performance pattern, a performance-adjusted formula can produce a more accurate forecast:

EAC = Budget at Completion (BAC) / Cost Performance Index (CPI)

This approach assumes past performance predicts future performance, which is often accurate for labor-heavy engagements where early inefficiencies tend to persist through completion.

Why EAC matters on fixed-fee projects

On a time-and-materials project, the client absorbs cost overruns. On a fixed-fee project, the firm absorbs them. EAC updated weekly tells the engagement manager whether the project is still profitable before the overrun becomes unrecoverable. A project where EAC exceeds contract value requires escalation, scope renegotiation, or a change order.

How EAC relates to other project health metrics

EAC works alongside budget burn and ETC to give a complete cost picture. Budget burn shows how much has been spent relative to plan. ETC shows what is still needed to finish. EAC combines both into a single final-cost forecast.

The realization rate and margin figures that leadership reviews at period end are downstream of EAC accuracy. An EAC that is consistently optimistic through the life of a project will produce reported margins that do not match cash reality at close.

Common EAC mistakes

• Updating EAC monthly instead of weekly, which delays warning signals until a loss is already locked in
• Using the original task estimates for ETC without adjusting for actual delivery pace
• Excluding expenses, subcontractor costs, or travel from the calculation, which understates true EAC
• Treating EAC as a reporting exercise rather than a decision-making input, which removes its value as an early warning