Project Management guide · Cost and resources
Budget at Completion (BAC): Definition, Formula and Example
Budget at completion (BAC) is the total planned budget for all the work in a project, or in a control account or work package. It equals the cost baseline and is the figure that earned value, forecasts and variances are measured against.
Key takeaways
- BAC is the cost baseline: the total planned budget for the work.
- It includes contingency but excludes management reserve.
- EV, EAC, VAC and TCPI are all calculated from BAC.
- BAC changes only through formal change control.
How BAC is calculated
BAC is the sum of the budgets for all work packages plus the contingency reserve. It does not include management reserve.
| Component | Amount |
|---|---|
| Design | $40,000 |
| Build | $90,000 |
| Test | $30,000 |
| Deploy and train | $20,000 |
| Contingency reserve | $20,000 |
| BAC (cost baseline) | $200,000 |
| Management reserve (excluded) | $15,000 |
| Total project budget | $215,000 |
How BAC is used
- Earned value: EV = percent complete x BAC. At 35% complete, EV = 0.35 x 200,000 = $70,000.
- Forecasts: EAC = BAC / CPI. With CPI 0.8235, EAC = $242,857.
- Variance at completion: VAC = BAC - EAC = 200,000 - 242,857 = -$42,857.
- TCPI: (BAC - EV) / (BAC - AC) shows the efficiency needed to finish within BAC.
- Percent spent: AC / BAC = 85,000 / 200,000 = 42.5%, compared with 35% complete.
When BAC changes
BAC is a baseline, so it should only change through change control: for example, when approved scope is added, or when management reserve is released for new in-scope work. Changing BAC simply because costs are running high hides the real performance.
Tips
- Make sure the sum of control account budgets equals BAC.
- Keep BAC fixed between approved changes so trends are meaningful.
- Report BAC and EAC side by side so the forecast gap is obvious.
- Record every baseline change with its reason and date.
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Frequently asked questions
What is budget at completion?
The total budget planned for all the project's work, equal to the cost baseline. It is written BAC.
How do you calculate BAC?
Add up the budgets for all work packages and the contingency reserve. Management reserve is excluded.
Does BAC include management reserve?
No. Management reserve is outside the cost baseline; adding it to BAC gives the total project budget.
What is the difference between BAC and EAC?
BAC is what the work was planned to cost. EAC is the current forecast of what it will actually cost.
Can BAC change during a project?
Only through approved changes, such as added scope. It should not be changed just to hide an overrun.
How is BAC used to calculate earned value?
EV = percent of work complete x BAC. If BAC is $200,000 and the work is 35% done, EV is $70,000.
How is BAC used to calculate VAC?
Variance at completion, BAC - EAC. A negative value is the expected overrun at the end.
Is BAC the same as the project budget?
Not quite. BAC is the cost baseline; the project budget adds management reserve.
Does BAC include contingency reserve?
Yes. Contingency for identified risks is part of the cost baseline and therefore of BAC.
Can BAC be calculated for part of a project?
Yes. Each control account and work package has its own BAC, and they add up to the project BAC.