Estimate at completion (EAC) is what you now expect the job to cost in total. The formula is cost to date plus cost-to-complete. Compared with the revised budget, it shows the projected overrun or underrun; compared with contract value, it shows projected gross profit.
Why it matters
EAC is the number that ties operations to the financial statements. It sets percent complete under the cost-to-cost method, which sets earned revenue. When EAC moves, reported profit moves. Tracking EAC month over month is also the cleanest way to spot margin fade early.
Worked example
Illustrative: Riverside Medical Center.
- Cost to date: $31.7M
- Cost to complete: $11.98M
- EAC: $43.68M
- Contract (incl. $1.1M approved COs): $49.3M
- Projected gross profit: $5.62M, or 11.4%
If CO #14 is approved at $86,400 and its cost estimate is, say, $75,000, contract rises to $49,386,400 and EAC rises to $43,755,000. The CO adds $11,400 of margin. Both sides have to move together, or the forecast is wrong.
Common mistakes
- Adding a change order to contract value without adding its cost to EAC, which inflates margin.
- Building EAC from accounting actuals alone, without the PM’s view of remaining work.
- Revising EAC only at quarter-end.
How os.construction handles it
We’re building EAC to update as costs, commitments and approved changes post, with a monthly PM sign-off so the forecast always has an owner.