Budget at Completion Formula (BAC Formula)

The Budget at Completion (BAC) formula is the foundation of Earned Value Management. It defines the total approved budget for all project work. Per PMBOK 6th Edition (p.263), the BAC formula is:

In plain terms: every work package, cost category, and contingency reserve is estimated and summed. The total is your BAC. Once approved at baseline, it is fixed — BAC does not change when costs overrun. Only the Estimate at Completion (EAC) changes.

BAC Formula in Context of EVM

The Budget at Completion formula feeds directly into every other EVM metric:

An inaccurate BAC makes every downstream EVM metric unreliable. Getting the BAC formula right is the most important step in project cost management.

5 Methods to Calculate BAC

There is no single algorithm for building BAC. PMBOK defines several estimation approaches, each suited to a different level of project definition:

1. Bottom-Up Estimation (Most Accurate)

Estimate every individual work package, then sum all estimates. Accuracy: ±5–10%. Requires detailed scope definition. This is the approach used in our BAC Builder tab.

2. Analogous Estimation

Use data from a comparable completed project as the starting point. Accuracy: ±25–75%. Fast but relies on having relevant historical data. Best for early-stage budgets.

3. Parametric Estimation

Derive cost from a statistical relationship between project scope and unit cost. Accuracy: ±10–20%. Common in construction (cost/m²), software ($cost/function point), and manufacturing.

4. Three-Point Estimation (PERT)

Weight three scenarios to produce a probability-weighted estimate. PERT accounts for schedule and cost uncertainty, making it more reliable than a single-point estimate.

5. Expert Judgement

Consult qualified subject matter experts when no comparable data exists. Combined with any of the above methods. Accuracy depends entirely on expert experience.

Worked Example: Applying the BAC Formula

A company is planning an office renovation project. The project manager applies bottom-up estimation to each work package:

This is the BAC: $990,000. The management reserve ($50,000) is held separately and is NOT part of the BAC formula. If by month 4 the project has spent $420,000 on 38% of the work, the EVM metrics become:

• AC = $420,000
• EV = 38% × $990,000 = $376,200
• CPI = $376,200 / $420,000 = 0.896 (over budget)
• EAC = $990,000 / 0.896 = $1,104,911 (projected overrun of $114,911)

What BAC Does NOT Include

Why BAC Must Never Change Mid-Project

A cost overrun does NOT change BAC. If your project overspends, you track this through:

• CV (Cost Variance) = EV − AC → shows current overrun amount
• EAC → shows revised total cost forecast
• VAC (Variance at Completion) = BAC − EAC → shows projected final overrun

If the project scope formally changes (approved change request), only then can the BAC be re-baselined. This is called a budget revision and requires formal change control.