Given CPI

Question

Given CPI < 1 and SPI < 1, and schedule pressure is causing overtime, which EAC formula is MOST realistic?

BlackTom AI · Accepted Answer

Topic context: Earned Value Management (EVM) in project scheduling and cost forecasting. The question asks which EAC (Estimate at Completion) formula is MOST realistic given CPI < 1 and SPI < 1, with schedule pressure causing overtime. 
Option A: 'EAC = BAC / CPI' — This formula isolates cost performance factor only, duplicating consideration of CPI but ignoring schedule performance (SPI) and work scope progression. If SPI is < 1, more work remains than earned value would indicate, so using only CPI would under-adjust the completion estimate when schedule issues exist. This choice neglects schedule delay effects on remaining work, making it less realistic under the described conditions.
Option B: 'EAC = AC + (BAC − EV) / CPI' — This variant uses actual costs to date plus the remaining work at the current cost efficiency (CPI) but ignores schedule performance (SPI). When SPI < 1, the remaining work is not progressing as fast as planned, so incorporating only CPI can underestimate the impact of schedule delay on remaining work, especially under overtime pressure. Therefore it’s not the most realistic given both CPI and SPI are below 1.
Option C: 'EAC = AC + (BAC − EV) / (CPI × SPI)' — This formulation adjusts the remaining work by both cost efficiency (CPI) and schedule efficiency (SPI) in the denominator, effectively accounting for underperforming cost and schedule. Since CPI < 1 and SPI < 1, the product (CPI × SPI) will be even smaller, increasing the estimated remaining cost, which aligns with a more conservative and realistic projection when both cost and schedule are lagging and overtime is present due to schedule pressure.
Option D: 'EAC = EV + AC − PV' — This expression rearranges terms in a way that can produce nonsensical results in EVM contexts: EV (earned value) plus actual costs minus planned value (PV) does not consistently reflect remaining work or performance indices, and it can misrepresent the baseline and cost-to-complete dynamics, especially under CPI and SPI deviations. It does not properly integrate CPI or SPI into the remaining work forecast, making it an unlikely realistic choice here.
In detail, the core concept is that EAC should reflect performance factors in both cost and schedule. When both CPI and SPI are less than 1, the project is consuming budget faster than earned value and also progressing slower than planned. The most faithful adjustment uses both indices in the denominator to scale the remaining work appropriately, which is precisely what Option C does. The other options fail to incorporate one or both performance indices adequately, leading to under- or mis-estimation under the given conditions.

BU.300.620.51.FA25 Managing Complex Projects – Final Exam (35Q)

Given CPI < 1 and SPI < 1, and schedule pressure is causing overtime, which EAC formula is MOST realistic?

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