What is Budget at Completion (BAC)?
Budget at Completion (BAC) 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.
Budget at Completion Formula
The Budget at Completion (BAC) is the sum of all budgeted costs for a project. It is calculated using the following formula:
BAC = Total Budgeted Cost of Work (TBCW)
Where:
TBCW is the cumulative total of all budgeted costs for the project's scope, including labor, materials, equipment, overheads, and contingencies. In practice, the BAC is determined during the planning phase by summing up the budgeted costs for all project tasks and activities. It represents the total amount of money that the project is expected to require from start to finish.
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. Other Cost Metrics
- BAC (Budget at Completion): The total budgeted cost for completing the project as initially planned. It serves as the baseline for cost performance measurement.
- EAC (Estimate at Completion): The forecasted total cost of the project based on current performance data. EAC adjusts the BAC to reflect actual progress and future work estimates.
- ETC (Estimate to Complete): The estimated cost required to complete the remaining work of the project. ETC focuses on the future costs from the current point to project completion.
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
