How to Calculate Budget at Completion

Knowing how to calculate budget at completion (BAC) accurately is the foundation of every successful project. BAC is the total approved budget for all project work — the financial baseline against which every cost and schedule metric in Earned Value Management (EVM) is measured. Get it wrong at the start and every downstream forecast — EAC, VAC, TCPI — is off. This guide walks through the formula, a six-step process, a full worked example, and the five main estimation methods.

The BAC Formula

The PMBOK® Guide 6th Edition defines BAC as the sum of all approved work package budgets. In formula terms:

BAC includes direct costs (labour, materials, equipment, subcontractors), indirect costs (overhead, G&A), and the contingency reserve (risk buffer for known-unknown risks). It excludes management reserve, which sits outside the cost baseline and is controlled by senior management for unknown-unknown events.

A critical property of BAC: once it is formally approved at project baseline, it is fixed. If costs overrun, that is reflected in a rising Estimate at Completion (EAC) — the BAC itself does not move unless a formal re-baselining process is approved.

Step-by-Step: How to Calculate Budget at Completion

Step 1 — Define the Complete Scope (WBS)

Decompose the project scope into a Work Breakdown Structure (WBS). Every deliverable and work package must be captured before any cost estimation begins. Incomplete scope at this stage is the single most common cause of BAC underestimation.

Step 2 — Estimate Each Work Package Cost

For each WBS work package, estimate labour hours × rate, material quantities × unit cost, equipment usage, and subcontractor fees. Bottom-up estimation at this level achieves ±5–10% accuracy.

Step 3 — Add Overhead and Indirect Costs

Apply your organisation's overhead rate to direct costs. Include general and administrative (G&A) expenses, project management office costs, and any other indirect costs that will be charged to the project.

Step 4 — Add Contingency Reserve

Add a contingency reserve — typically 10–15% of direct costs — to cover identified risks that may materialise during execution. This reserve is part of the cost baseline and therefore part of BAC.

Step 5 — Obtain Formal Approval

Submit the total estimate for sponsor and stakeholder approval. Once approved, this figure becomes the BAC and cost baseline. Document it formally; any future changes require a formal change request.

Step 6 — Track Performance with EVM

Once execution begins, use BAC in EVM formulas to track performance in real time:

Worked Example — Construction Renovation Project

A commercial building renovation project has the following approved work package budgets:

Six months into the project, the team reports 40% completion. Actual costs to date are $240,000. Using BAC, we can calculate all key EVM metrics:

The project is currently running 8.3% over budget. At this efficiency rate, the forecast cost at completion is $599,780 — a projected overrun of $49,780. Without an accurate BAC, none of this early-warning signal would be available.

5 Methods to Calculate BAC

Common Mistakes When Calculating BAC

• Incomplete scope — Missing work packages lead to systematic underestimation. Always complete the WBS before estimating.
• Forgetting indirect costs — Overhead and G&A costs are real project charges. Omitting them guarantees a cost overrun from day one.
• No contingency reserve — Projects without a reserve have no buffer for foreseeable risks. Even low-risk projects should carry 5–10%.
• Treating BAC as adjustable — BAC is a baseline, not a living estimate. Changing it in response to overruns destroys the integrity of EVM metrics. Use EAC for forecasting instead.