Construction Management

Budget at Completion (BAC) in Earned Value Management


Budget at Completion (BAC) is established early in the contract for each level of the Work Breakdown Structure (WBS). They represent the total budget from which individual period Budgeted Cost of Work Scheduled (BCWS) values are derived, and they serve as the benchmarks for calculating overruns and underruns at the contract’s end. The budgets for all authorized work must be recorded in the BAC.

The BAC is also known as a project’s “Total Planned Value.” There is no formula associated with BAC.

What is Budget At Completion in Project Management?

The Budget At Completion or BAC is the estimated total and budgeted expenditure for the project or specific phase of the project or, in simple terms, the estimated cost of the project before the start of the project.

BAC can be used to compare the original forecast with ongoing project performance on a schedule with costs during a project in project management and as part of earned value management.

The other main way to compare the budget to the actual predetermined budget that was set at the proposal, quotation or tender stage (if this BAC is not calculated accurately before this stage) is to use the budget at completion.

Budget At Completion (BAC) Formula

BAC= Total Project Budget

Budget at Completion Estimation

  1. Expert Judgement: As it sounds, the estimation of this type of budget involves the finding of an expert to calculate the cost of a project.
  2. Parametric Estimation: Calculation of the BAC in this way involves the calculation of the combined unit rate of all the activities involved in the delivery of the project. These unit rates or ‘averages’ can be drawn from industry averages, or the average companies have recorded and analyzed over time. These averages can also be adjusted on the basis of the specifics for a specific project to make it even more accurate.
  3. Analogous Esmitation: This method involves comparing the work to the actual cost of a similar project. If you have any differences between the two projects, they must be taken into account in the analysis of what the differences are. For example, we build five floors for Project A, so if we need to build 10 floors for Project B, we will estimate twice the cost of Project A, but we estimate that the floors are 20% bigger, so we will add 20% more.

The Budget At Completion is a powerful Earned Value Analysis measure in project management and is used as a source of information and comparison throughout the life of the project. For this reason, whatever method you use as your BAC formula needs to be accurate, consistent, and repeatable across all possible projects that you accept and participate in.

Budget At Completion Example

As a simple example of what a budget at completion BAC calculation might look like, let’s consider a simple Building construction project which has multiple phases:

  • Excavation- $20,000
  • Concrete Works – $70,000
  • Building walls – $60,000
  • Flooring – $40,000
  • Painting Works- $8,000
  • MEP Works-$120,000

The budget at completion for this project would be calculated out to $318,000.

This final BAC could then be used to better inform resource allocation, and gauge project performance throughout the life of the project.

See Also

SPI in Earned Value Management

CPI in Earned Value Management