How to Estimate the Cost to Complete

Start with the work still on the desk

A design assignment has a $12,000 internal cost budget. The latest cost report shows $8,000 spent, leaving $4,000 in the budget. That remaining budget does not tell you whether $4,000 will finish the job.

The estimate to complete (ETC) is the forecast cost of the remaining authorized work. Add it to the actual cost already incurred to get the estimate at completion (EAC). The Department of Energy’s cost-estimating handbook uses these distinctions. In everyday project work, they separate what has happened from what you now expect.

This example concerns the consultant’s delivery cost. Use internal cost rates that include the same cost components as the budget and actuals. Client billing rates would answer a different question about revenue or fees.

Build a remaining-work estimate

Ask the people doing the work what remains to reach the agreed completion condition. Include checking, corrections, coordination, and submission. A work breakdown structure can help you walk through the deliverables without overlooking a package.

For this illustrative assignment, the remaining work is 20 design hours at $100 per hour, eight review hours at $150, and six coordination and submission hours at $100. Another $600 of specialist work remains unperformed. None of these costs is included in the $8,000 actual cost.

Use one reporting date and one cost basis

Check timesheets, invoices, and outstanding commitments before adding the figures. Work already performed but not yet invoiced belongs in incurred cost, using an accrual where appropriate. Unperformed committed work belongs in the remaining forecast. Counting the same specialist work in both would overstate the total.

Record the estimate’s reporting date and what the rates include. If actuals include overhead but remaining labor uses salary alone, the total will look more favorable without the work getting any cheaper.

Make uncertainty visible

Suppose the estimate assumes one review cycle, but an unresolved design question could require eight additional design hours. At the example’s $100 cost rate, that would add $800, bringing the forecast to $13,200 if it occurs.

Show that as a specific scenario with an owner and a date for resolving the question. Do not add it again if an existing risk allowance already covers the same work. Keep proposed scope additions separate until their authorization and budget treatment are clear.

Use performance measures as a cross-check

An earned-value forecast can show what continued cost performance would imply. A remaining-work estimate lets you inspect the actual tasks ahead. If the two forecasts disagree, look for the reason: a difficult phase may be finished, or the remaining hours may omit a review cycle.

For the worked example, the useful update is: “We expect $4,400 more cost and a $12,400 finish against a $12,000 budget. That includes one review cycle. We will resolve the design question on Thursday and update the forecast if another cycle is needed.” The overrun is small enough to discuss clearly, and early enough to examine the options.