What is BAC in Project Management?
Budget at Completion (BAC) in project management is the total anticipated cost of completing a project as initially planned. It is established during the project planning phase and includes all expected costs for the project's scope, covering everything from initial design to final delivery. BAC serves as a financial benchmark that helps project managers monitor progress, control costs, and ensure that the project remains within its allocated budget.
About Budget at Completion
BAC is a fundamental component of project cost management, providing a reference point for measuring project performance. It allows project managers to track actual expenditures against the planned budget and identify any deviations early. By comparing BAC with actual costs and forecasts, project managers can take corrective actions to keep the project on track financially.
How to Calculate BAC in Project Management
To calculate Budget at Completion (BAC) in project management, sum all budgeted costs for the project's full scope. This includes labor, materials, equipment, overheads, and contingencies.
BAC Formula in Project Management
The BAC formula in project management is BAC = Total Budgeted Cost of Work, where the Total Budgeted Cost of Work (TBCW) represents the cumulative sum of all planned costs for project tasks and activities, including labor, materials, equipment, overheads, and contingencies.
Steps to Calculate BAC of a Project
- List all planned costs for labour, materials, equipment, and other direct and indirect expenses.
- Break down costs by work package using a Work Breakdown Structure (WBS).
- Sum all budgeted costs across the entire project scope.
- Include contingency reserves if applicable.
- Verify the total against project funding and scope to ensure accuracy.
Example BAC Calculation
A project has the following budgeted costs:
- Labor = $500,000
- Materials = $300,000
- Equipment = $100,000
- Contingency Reserve = $50,000
Using the Budget at Completion formula:
BAC = 500,000 + 300,000 + 100,000 + 50,000
So, the BAC for this construction project is $950,000, serving as the baseline for cost performance measurement.
Best Practices for Establishing BAC
- Comprehensive Planning: Develop a detailed project plan that includes all aspects of the project scope, timeline, and resource requirements. This plan forms the basis for the BAC.
- Accurate Estimation: Use accurate cost estimation techniques, incorporating historical data, expert judgment, and industry benchmarks to estimate costs for all project activities.
- Include Contingencies: Account for potential risks and uncertainties by including contingency reserves in the BAC. This helps manage unforeseen expenses and keeps the project within budget.
- Regular Reviews: Review and update the BAC regularly to reflect any changes in project scope or requirements. This ensures that the BAC remains relevant and accurate throughout the project lifecycle.
- Stakeholder Approval: Obtain approval from all relevant stakeholders, including the project owner, project manager, and financial sponsors, to ensure alignment and commitment to the BAC.
BAC vs EAC in Project Management
Budget at Completion (BAC) is the total planned budget, while Estimate at Completion (EAC) is the projected final cost based on actual spending and performance. BAC remains unchanged unless formally adjusted, while EAC fluctuates as project conditions evolve. Comparing BAC vs. EAC helps project managers track budget performance and anticipate cost overruns.
- BAC (Budget at Completion) – The original approved budget for the entire project.
- EAC (Estimate at Completion) – The updated forecast of total project costs based on real-time data.
- BAC is fixed, established before the project starts.
- EAC is flexible, adjusting as cost performance changes.
- BAC vs. EAC analysis highlights financial risks—if EAC > BAC, the project is exceeding budget.
For example, if a project was budgeted at $750,000 (BAC) but delays and increased material costs push the EAC to $850,000, the team must reassess expenses, adjust scope, or find cost-saving measures to stay within financial limits.
When to Use Budget at Completion
- Project Planning: Establish BAC during the project planning phase to set a financial baseline for the project.
- Cost Tracking: Use BAC as a benchmark for tracking actual project expenditures and identifying any cost variances.
- Performance Measurement: Compare BAC with EAC and ETC to evaluate project performance and forecast final costs.
- Stakeholder Reporting: Provide BAC figures in regular financial reports to stakeholders, ensuring transparency and accountability.
By using BAC, project managers can maintain better control over project finances, monitor cost performance, and ensure that the project stays within its allocated budget.
Budget at Completion Example in Mastt
By leveraging Mastt, project managers can enhance their BAC processes, leading to more efficient project reporting.
Project financial overview in Mastt showing a detailed BAC breakdown
