At project approval, you receive a number.

During project control, you earn the truth.

As performance data is reported during execution, the team gains enough information to refine the initial estimate and establish a more accurate forecast.

That refinement leads to better action plans and clearer visibility of trends.

Let’s walk through it logically.

Let’s say your project has an approved total budget:

BAC (Budget at Completion) = $2,000,000

During project control, you typically know what you’ve spent so far:

AC (Actual Cost) = $1,050,000

What this represents: This is pulled from invoices, labour costs, and purchase orders — your actual spend to date.

Now you need one more input:

How much work is truly complete?

Assume structured progress measurement (e.g., weighted milestones) confirms the project is 45% complete.

% Complete = 45%

So:

EV (Earned Value) = % Complete × BAC
EV = 0.45 × 2,000,000
EV = $900,000

Why this matters:
EV converts physical progress into “budget language.”
It answers: “How much budgeted value have we actually earned?”

Now compare earned value against actual cost:

CPI = EV / AC
CPI = 900,000 / 1,050,000
CPI = 0.857

What this means:
CPI measures cost efficiency.

A CPI of 0.857 means you are earning only $0.86 of planned value for every $1.00 spent.

Another way to interpret it:

1 / 0.857 ≈ 1.17

You are spending about $1.17 to deliver $1.00 of planned work.

In formula terms:

CPI < 1 indicates cost inefficiency — the project is spending more than planned for the work completed.

This is trend visibility — not judgement.

If this cost efficiency continues for the remainder of the project:

EAC = BAC / CPI
EAC = 2,000,000 / 0.857
EAC ≈ $2,334,000

Why this matters:
EAC turns today’s performance trend into a forward-looking forecast.
It answers: “If nothing changes, where will we likely finish?”

Now compare forecast vs original budget:

Forecast overrun = EAC − BAC
Overrun ≈ 2,334,000 − 2,000,000
Overrun ≈ $334,000

This does not mean the project is failing.

It means cost performance is below plan.

If nothing changes, the project will overspend.
But at 45% complete, you still have time to act.

Forecasting creates options:

Without forecasting, overruns are discovered at the end.

With forecasting, they are managed while there is still time to correct them.

Early estimates are built on assumptions.

Execution produces data.

Leadership means updating the forecast when reality changes.

Strong project leaders don’t defend outdated baselines.

They explain trends clearly — and act on them.

Forecasting is not pessimism.

It is control.

And control builds trust.

P.S. If we’re not connected on LinkedIn yet, feel free to connect — I regularly share knowledge and insights on project management and engineering.

See you next Saturday!