Earned Value Definitions
Variance at Completion (VAC) with EAC

What is Variance at Completion (VAC) with EAC? Earned Value Management explained.

Mia Rutherford
Mia Rutherford
February 24, 2024
5 min read

Variance at Completion (VAC) and Estimate at Completion (EAC) are pivotal components of Earned Value Management (EVM), a methodology widely used in project management to assess project performance and forecast future outcomes. This article delves into the intricacies of VAC, EAC, and EVM, offering a comprehensive explanation tailored for professionals preparing for the PMP exam or those keen on mastering project cost management techniques. We'll explore the foundational concepts, calculation methods, and the significance of these metrics in steering project success.

Key Takeaways

Understanding Earned Value Management (EVM)

Fundamentals of EVM

At the heart of Earned Value Management (EVM) lies the ability to combine measurements of project scope, schedule, and cost in a single integrated system. EVM is recognised for its capacity to provide accurate forecasts of project performance problems, which is essential for effective project management.

Fundamental to EVM is the concept of 'earned value', or EV, which is the measure of work performed expressed in terms of the budget authorised for that work. To grasp the full picture of a project's health, several key metrics are used:

These metrics serve as the building blocks for more advanced calculations, such as the Cost Performance Index (CPI) and the Schedule Performance Index (SPI), which help in assessing the project's cost efficiency and timeliness, respectively. Understanding these fundamentals is crucial for anyone looking to master EVM and ensure their project's success.

Key EVM Metrics and Formulas

Earned Value Management (EVM) is a robust tool that enables project managers to measure and analyse project performance and progress. Key metrics such as Cost Variance (CV) and Schedule Variance (SV) provide immediate insights into the cost efficiency and timeliness of a project, respectively. These metrics are derived from fundamental EVM formulas:

Understanding these formulas is crucial for effective project control and management. For instance, the Estimate at Completion (EAC) can be calculated using several methods, depending on the project's circumstances and the data available. The Variance at Completion (VAC), which is the difference between the Budget at Completion (BAC) and the EAC, indicates whether the project will be over or under budget. These calculations, when interpreted correctly, can lead to strategic decisions that steer a project back on course or optimise its outcomes. The PMP Formulas Cheat Sheet can serve as a handy reference for these essential calculations, ensuring that project managers are equipped to maintain control over their projects' financial health.

Interpreting EVM Data for Project Health

The adept interpretation of Earned Value Management (EVM) data is pivotal for assessing the health of a project. It enables project managers to gauge whether the project is on track, both in terms of schedule and budget. To effectively interpret EVM data, consider the following metrics:

These metrics, when analysed collectively, provide a comprehensive view of project performance. For instance, a CPI greater than 1 suggests that the project is under budget, while an SPI greater than 1 indicates that the project is ahead of schedule. Conversely, values less than 1 highlight areas of concern that may require corrective actions.

Moreover, understanding the Estimate at Completion (EAC) and Variance at Completion (VAC) can forecast the expected total costs and variances at project completion, respectively. These forecasts are essential for proactive project management, allowing for timely adjustments and strategic decision-making to ensure that the project's trajectory aligns with its objectives.

Deciphering Estimate at Completion (EAC)

The Concept of EAC in Project Forecasting

In the realm of project management, Estimate at Completion (EAC) serves as a pivotal forecasting tool, enabling project managers to predict the total cost of a project at its conclusion. It is a dynamic figure, subject to change as the project progresses and more information becomes available. EAC is particularly crucial in the context of construction and project management, where accurate forecasting is synonymous with effective cost control and resource allocation.

To grasp the concept of EAC, one must understand its relationship with other key metrics within Earned Value Management (EVM). These include:

Calculating EAC can be approached through various methods, each with its own set of considerations. The most straightforward formula is EAC = BAC / CPI, which assumes that future project performance will mirror past performance. However, this may not always hold true, and alternative calculations may incorporate factors such as the remaining work and the efficiency at which teams are expected to complete this work.

Understanding EAC is not just about crunching numbers; it's about gaining insights into the project's financial trajectory, enabling informed decision-making and strategic planning. It is a cornerstone of a comprehensive glossary on Earned Value Management (EVM) and project cost estimation techniques, which also includes other metrics such as Estimate to Complete (ETC), Cost Performance Index (CPI), and variance analysis. These tools collectively contribute to robust project performance measurement and control, ensuring that project managers are well-equipped to steer their projects towards successful completion.

Calculating EAC: Methods and Considerations

The process of calculating the Estimate at Completion (EAC) is pivotal in forecasting the total cost of a project. It involves a blend of historical project data and future performance expectations. There are several methods to calculate EAC, each suitable for different scenarios:

Each method requires careful consideration of the project's context and the reliability of the data available. It's essential to factor in the risk scores and potential cost fluctuations, as they can significantly impact the final EAC. A comprehensive understanding of these calculations will empower project managers to make informed decisions and maintain control over project finances.

Integrating EAC with Project Management Practises

The integration of Estimate at Completion (EAC) into project management practises serves as a platform for predictable project delivery, streamlined cost management, and collaborative contract management. By incorporating EAC, project managers can leverage real-time data to make informed decisions, ensuring that projects remain on track and within budget.

Key steps in integrating EAC with project management include:

In essence, EAC becomes a vital tool in the project manager's arsenal, enabling a more dynamic and responsive approach to project control. It is not just about the numbers; it's about creating a culture of continuous improvement and strategic foresight in the realm of project management.

Exploring Variance at Completion (VAC)

Defining VAC and Its Role in Cost Management

Variance at Completion (VAC) is a pivotal metric in the realm of cost management, providing a clear indication of the financial health of a project. It represents the difference between the Budget at Completion (BAC) and the Estimate at Completion (EAC), essentially forecasting the expected budget surplus or deficit at the project's end. Understanding VAC is crucial for project managers to ensure that the project remains financially viable and to make informed decisions about resource allocation and cost control strategies.

The calculation of VAC is straightforward: VAC = BAC \- EAC. This formula allows project managers to gauge the cost performance of the project at any given point in time. A positive VAC value indicates a projected under-run, suggesting that the project is likely to finish under budget. Conversely, a negative VAC value signals a cost overrun, prompting immediate attention to mitigate financial risks.

Incorporating VAC into regular project reviews enables a proactive approach to managing costs. It serves as an early warning system, allowing project teams to adjust plans and operations before cost variances escalate. For instance, Network Rail is implementing NEC4 framework in CP7 projects for flexibility, user-friendliness, efficiency, and risk reduction in the rail sector. By integrating such frameworks with VAC analysis, organisations can enhance their cost management practises and drive project success.

How to Calculate VAC and Analyse Outcomes

The Variance at Completion (VAC) is a critical metric in Earned Value Management, providing a projection of the expected budget surplus or deficit by the end of the project. To calculate VAC, one must subtract the Estimate at Completion (EAC) from the Budget at Completion (BAC), as shown by the formula: VAC = BAC \- EAC. This calculation offers a straightforward insight into the financial health of a project.

Analysing the VAC outcomes involves a deeper dive into the numbers. A positive VAC indicates a project is under budget, while a negative VAC suggests overruns. It's essential to consider the reasons behind these variances, which could range from changes in project scope to unexpected challenges or even construction innovation. Here are some steps to effectively analyse VAC outcomes:

By understanding and acting upon the VAC, project managers can make informed decisions to steer their projects towards successful completion and financial stability.

VAC's Impact on Project Decision-Making

The Variance at Completion (VAC) is a pivotal metric in the realm of project management, particularly when it comes to steering a project towards its financial objectives. By providing a clear indication of the expected financial position at project completion, VAC enables project managers to make proactive adjustments to the project plan. This foresight is crucial in maintaining control over the budget and ensuring that the project remains financially viable.

Key decisions influenced by VAC include:

In essence, VAC serves as a compass for project managers, guiding them through the complexities of cost management. It is a tool that, when used effectively, can transform variance analysis from a reactive to a proactive process. This transformation is essential for ensuring project success, as it allows for timely interventions that can save costs and keep the project on track. Ultimately, VAC is not just a number; it's a strategic asset in the project manager's toolkit.

Project Performance and Control Measures

Performance Measurement Baseline (PMB)

The Performance Measurement Baseline (PMB) is a foundational element in the realm of project management, serving as a benchmark for gauging project performance. It encapsulates the project's scope, objectives, costs, schedule, and the resources required for completion, providing a comprehensive framework for comparison against actual progress.

Key components of the PMB include:

By establishing a PMB, project managers can effectively monitor and control project execution, ensuring that performance aligns with the planned objectives. It is a critical tool for maintaining the integrity of the project lifecycle, from initiation through to completion. Moreover, the PMB aids in the identification of variances and facilitates timely corrective actions, which are vital for keeping the project on track and within budget.

In the ever-evolving field of project management, the PMB remains a constant, reflecting the importance of structured planning and control. As we explore the impact of site diaries on project management, including the use of Earned Value Metrics and real-time reporting, we can appreciate how these practises contribute to avoiding disputes and enhancing project delivery. Indeed, the journey of project management has significantly evolved since 1826, with the PMB being a testament to the enduring principles of effective project oversight.

Configuration Control and Its Importance

In the dynamic landscape of project management, configuration control is the backbone that ensures all project specifications are adhered to meticulously. It is a subset of the broader configuration management plan, which outlines how project information is to be stored and updated to prevent disruptions in project functioning.

The importance of configuration control cannot be overstated. It is the mechanism that allows for the timely identification and management of changes, safeguarding the project against unforeseen deviations. This control process is crucial for maintaining operational efficiency and achieving the strategic objectives outlined in the project management plan.

Utilising Control Measures to Steer Project Success

In the dynamic realm of project management, control measures are not just a formality; they are the rudder that steers the project towards its intended destination. Effective control measures ensure that a project remains on track, adapting to the inevitable changes and challenges that arise.

Key control measures include:

Moreover, clear and frequent communication with all stakeholders is imperative. It not only aids in early issue identification but also aligns expectations, fostering a collaborative environment. As the project nears completion, ensuring that all deliverables meet the agreed criteria and addressing any outstanding issues is paramount for a successful closure.

The Significance of Stakeholder Engagement

Stakeholder Management in Project Lifecycle

Effective stakeholder management is a cornerstone of successful project delivery. It involves the systematic identification, analysis, and engagement of all parties affected by the project. Ensuring that stakeholders are kept informed and involved throughout the project lifecycle is crucial for aligning expectations and fostering a collaborative environment.

Key aspects of stakeholder management include:

By integrating stakeholder management into the project lifecycle, managers can preemptively address potential issues, thereby reducing the risk of project delays or dissatisfaction. Moreover, it is essential to measure the outcome of the project against stakeholder expectations during project closure, ensuring any outstanding issues are resolved. This holistic approach not only enhances project outcomes but also strengthens relationships for future collaborations.

Communication Channels and Their Effectiveness

Effective communication channels are the lifeblood of project management, ensuring that all stakeholders are aligned and informed. Clear and frequent updates are essential for identifying issues early and keeping the project on track. A construction reporting platform can be instrumental in this regard, offering features like shift planning, reporting, and fatigue management. Such tools streamline data analysis, automate progress tracking, and improve cost management, fostering collaborative decision-making.

The choice of communication channels should be tailored to the needs of the project and its stakeholders. Consider the following:

Ultimately, the effectiveness of communication channels hinges on their ability to facilitate timely and accurate information exchange, thereby minimising misunderstandings and ensuring that every stakeholder is considered. This is crucial not only for the project's success but also for achieving a smooth project closure without any lingering issues.

Ensuring Stakeholder Satisfaction and Project Closure

Achieving stakeholder satisfaction is paramount to the successful closure of any project. It is essential to communicate effectively and ensure that all stakeholders are aligned with the project's objectives and outcomes. Regular updates and transparent reporting can foster trust and facilitate a collaborative environment.

To ensure a smooth project closure, consider the following steps:

  1. Verify that all project deliverables meet the agreed quality standards and stakeholder requirements.
  2. Address any outstanding issues or misunderstandings promptly to avoid any lingering discontent.
  3. Conduct a thorough project review to measure the outcome against initial expectations, documenting lessons learned for future reference.
  4. Obtain formal acceptance of the project's completion from key stakeholders, signifying their satisfaction with the results.

Remember, a project is not truly complete until the stakeholders deem it so. Their approval is a testament to the project's success and the effectiveness of the management practises employed throughout its lifecycle.


In conclusion, understanding the intricacies of Earned Value Management, particularly Variance at Completion (VAC) and Estimate at Completion (EAC), is indispensable for effective project control and management. These metrics provide project managers with a comprehensive view of cost performance and forecast potential overruns, enabling proactive adjustments. Mastery of these concepts, along with other critical elements such as cost estimating, stakeholder management, and risk assessment, is crucial for those aspiring to excel in project management and achieve PMP certification. As the project landscape continues to evolve, the ability to accurately predict and manage project outcomes using these tools will remain a valuable asset for professionals in the field.

Frequently Asked Questions

What is Earned Value Management (EVM) in project management?

EVM is a project management technique that integrates scope, costs, and schedule measures to help the project management team assess and measure project performance and progress.

How is the Estimate at Completion (EAC) calculated?

EAC can be calculated using various formulas, such as EAC = BAC/CPI, EAC = AC + Bottom-up ETC, or EAC = AC + (BAC – EV), depending on the circumstances and available data.

What does Variance at Completion (VAC) indicate?

VAC indicates the difference between the Budget at Completion (BAC) and the Estimate at Completion (EAC), providing insights into the projected cost overruns or underruns at the end of the project.

Why is stakeholder engagement crucial in project management?

Stakeholder engagement is essential as it ensures all parties involved are informed about project progress and changes, leading to better decision-making and minimising the risk of unpleasant surprises.

What is the significance of the Performance Measurement Baseline (PMB)?

The PMB serves as a benchmark for comparison against actual project performance. It consists of the project's scope, objectives, costs, schedule, and required resources, and is critical for managing performance.

How can a project manager handle risks effectively?

Effective risk management involves anticipating potential risks, planning for them, and having contingency plans in place. This proactive approach can greatly mitigate the impact of risks on project success.

Calculation: VAC = BAC - EAC

Keep up with Gather

Make sure you never miss out! Sign up to our monthly newsletter to keep up with the biggest news stories in construction and the latest Gather updates. Full of our latest case studies, blogs and fun quizzes!

Thank you for subscribing!
Oops! Something went wrong while submitting the form.

Gather needs the contact information you provide to us to contact you about our products and services. You may unsubscribe from these communications at anytime. For information on how to unsubscribe, as well as our privacy practices and commitment to protecting your privacy, check out our Privacy Policy.