Estimate at Completion (EAC) Life Cycle
Estimate at Completion (EAC) is a project management technique used to forecast the total cost of a project when actual costs differ from the original budget. It requires continuous updating and refining the EAC throughout the project’s lifecycle. It is crucial for a project manager to comprehend their project’s cost forecast for informed decision-making throughout the project’s lifecycle. An effective approach to achieve this is by implementing the Estimate at Completion (EAC) Life Cycle, which includes consistent updates and refinement of the EAC throughout the project’s duration. This article will delve into the steps involved in the EAC Life Cycle concerning a construction project.
Step 1: Planning
In the planning stage, the project manager is required to evaluate the project’s overall cost, considering the work scope, schedule, and necessary resources. This preliminary assessment acts as the starting point for forecasting the project’s expenses. Additionally, the project manager must determine the Key Performance Indicators (KPIs) to supervise and regulate the project’s expenditure.
Step 2: Preliminary Design
The preliminary design phase requires that the project manager to engage his/her team to enhance the cost estimation according to the design and engineering criteria. This process entails recognizing the significant elements and systems required and assessing the expenses for materials, equipment, and labor.
Step 3: Detail Design
In the detail design phase, the project manager is responsible for revising the cost estimation to reflect any alterations to the design and engineering specifications. This involves enhancing the cost estimation for each principal element and system, along with recognizing supplementary expenses associated with permitting, testing, and commissioning.
Step 4: Procurement / Tendering
The procurement/tendering phase, requires project manager’s team to take upon the responsibility to guarantee that the project’s expense forecast matches the bid proposals submitted by contractors and vendors. This requires a comparison of the bid proposals submitted by contractors against the initial cost estimate to identify any inconsistencies.
Step 5: Construction
After going through design and bidding phase, the most important and practical part of project comes to life i.e. the construction phase. In it the project manager should monitor the project’s actual costs against the cost forecast, and identify any variances. This involves tracking the cost of materials, equipment, labor, and subcontractors, as well as identifying any additional costs associated with change orders or unforeseen circumstances. To track above mentioned aspects of project, many softwares can be used i.e. Primavera P6, MS Project, Smart Sheet, Asana, Trello, and Base camp.
Step 6: Operation & Maintenance
After handing over the project to the end user or client, operation and maintenance phase of project is encountered. Throughout the operation and maintenance phase, the project manager needs to be engaged at the project and should persist in supervising the project’s real expenses against the estimated costs and recognizing any continuing maintenance or repair expenses that were not accounted for in the initial estimate.
Step 7: End of Life
Every project has a life span after which it’s usability is of no more value. In the final stage of the project, the project manager is again engaged to evaluate the overall cost of the project, which comprises not only the expenses incurred but also the costs related to decommissioning or demolition. This evaluation involves analyzing the actual expenses of the project against the initial cost estimation and pinpointing any discrepancies or opportunities for enhancement.
To summarize, integrating the EAC Life Cycle is a vital aspect of project cost forecasting. Adhering to above mentioned steps, project managers can ensure that the project’s expense forecast is precise and current, facilitating informed decision-making and enabling them to stay on course.