Budget at Completion (BAC) – The sum of all budgets established for the work to be performed on a project or work breakdown structure component or schedule activity.
Key Characteristics:
- Total authorized budget: Complete approved budget for the entire project
- Performance measurement baseline: Key component of earned value management
- Fixed reference point: Remains constant unless formally changed through change control
- Excludes management reserve: Does not include funds held for unknown risks
- Completion target: Represents planned total cost if project goes according to plan
BAC Components:
- Direct costs: Labor, materials, equipment directly attributable to project work
- Indirect costs: Overhead and administrative costs allocated to the project
- Contingency reserves: Funds allocated for identified risks (known unknowns)
- Profit/fee: If applicable in contracted projects
BAC Exclusions:
- Management reserves: Funds for unknown risks (unknown unknowns)
- Unallocated budget: Funds not yet assigned to specific work
- Customer-furnished items: Resources provided by customer at no cost
Earned Value Management Role:
BAC is fundamental to all EVM calculations:
Key EVM Formulas Using BAC:
- To-Complete Performance Index (TCPI): (BAC – EV) / (BAC – AC)
- Variance at Completion (VAC): BAC – EAC
- Percent Complete: EV / BAC × 100
- Percent Spent: AC / BAC × 100
BAC vs. Related Budget Terms:
- BAC: Total project budget (performance measurement baseline)
- Project Budget: BAC + Management Reserves
- EAC (Estimate at Completion): Forecasted final cost
- ETC (Estimate to Complete): Remaining work cost estimate
- TAB (Total Allocated Budget): BAC + Management Reserves
BAC Establishment Process:
- Cost estimation: Develop detailed project cost estimates
- Budget aggregation: Sum all work package and activity budgets
- Reserve allocation: Add contingency reserves for identified risks
- Time-phasing: Distribute BAC across project timeline (creates PV)
- Approval: Obtain formal authorization for BAC
- Baseline: Establish BAC as part of cost baseline
BAC Changes:
- Change control required: BAC can only be modified through formal change management
- Scope changes: Approved scope changes may alter BAC
- Contract modifications: Changes to contracted work affect BAC
- Re-baselining: Major changes may require complete baseline revision
- Version control: Maintain history of BAC changes
Performance Analysis Using BAC:
Cost Performance:
- Cost Variance (CV): EV – AC
- Cost Performance Index (CPI): EV / AC
- Variance at Completion (VAC): BAC – EAC
Schedule Performance:
- Schedule Variance (SV): EV – PV
- Schedule Performance Index (SPI): EV / PV
Completion Forecasting:
- EAC = BAC / CPI (assumes future work at current efficiency)
- EAC = AC + (BAC – EV) (assumes future work at planned efficiency)
- EAC = AC + ETC (based on new estimate for remaining work)
BAC Applications:
- Performance measurement: Compare actual progress against total budget
- Forecasting: Predict final project costs relative to original budget
- Variance analysis: Identify cost and schedule deviations
- Change impact assessment: Evaluate effects of proposed changes
- Stakeholder reporting: Communicate project financial status
- Contract management: Track performance against contracted amounts
Example:
A software development project has:
- Labor costs: $800,000
- Hardware/software: $150,000
- Contingency reserve: $50,000
- BAC = $1,000,000
If at project midpoint:
- EV = $600,000 (60% complete)
- AC = $650,000 (actual spent)
- CPI = 600,000 / 650,000 = 0.92
- EAC = 1,000,000 / 0.92 = $1,087,000
- VAC = 1,000,000 – 1,087,000 = -$87,000 (overrun)
Common Issues:
- Unrealistic BAC: Overly optimistic budget setting
- Scope creep: Work expansion without BAC adjustment
- Poor estimation: Inadequate initial cost analysis
- Change control gaps: Informal changes not reflected in BAC
- Baseline integrity: Frequent changes undermining performance measurement
Best Practices:
- Realistic budgeting: Base BAC on thorough cost analysis
- Stakeholder agreement: Ensure all parties understand and accept BAC
- Change discipline: Maintain strict change control over BAC
- Regular monitoring: Track performance against BAC consistently
- Clear documentation: Document BAC components and assumptions
- Trend analysis: Monitor BAC performance trends over time
Reporting and Communication:
- Budget status reports: Show spending against BAC
- EVM reports: Display cost and schedule performance relative to BAC
- Forecast reports: Project final costs compared to BAC
- Variance reports: Highlight significant deviations from BAC
- Dashboard metrics: Key performance indicators using BAC
Related Terms:
- Estimate at Completion (EAC): Forecasted total project cost
- Planned Value (PV): Time-phased portion of BAC
- Earned Value (EV): Budgeted cost of completed work
- Actual Cost (AC): Real cost incurred for completed work
- Cost Baseline: Time-phased version of BAC
- Management Reserve: Budget outside of BAC
- Total Allocated Budget (TAB): BAC plus management reserves
- Performance Measurement Baseline (PMB): Integrated scope-schedule-cost baseline including BAC
