Budget at Completion (BAC): The Project Cost Baseline Anchor
PMBOK v8 Definition
Budget at completion (BAC) is the sum of all budgets established for the work to be performed. It represents the value of total planned work: the project cost baseline. BAC is the total authorized budget for completing all project work and serves as the fundamental reference point for all earned value management (EVM) calculations.
Why It Matters for the Exam
BAC appears in nearly every earned value management (EVM) question on the PMI exam. It is the denominator for calculating key performance indicators like cost performance index (CPI) and schedule performance index (SPI), and it is essential for computing estimate at completion (EAC) and variance calculations. Expect 2-4 questions directly testing your understanding of BAC and its relationship to other EVM metrics.
Key Points to Remember (for the exam)
- Definition: BAC = total planned work = project cost baseline (sum of all budgets)
- Components: BAC includes contingency reserves but excludes management reserves
- Fixed Value: BAC does NOT change during the project (unlike EAC which recalculates)
- Primary Use: BAC is the baseline against which earned value (EV) and actual cost (AC) are compared
- Calculation Role: BAC is used to compute: % Complete = EV/BAC, CPI = EV/AC, SPI = EV/PV
- Funding Relationship: Total funds required = cost baseline (includes BAC + contingency) + management reserves
- Common Confusion: BAC is NOT the same as total project funding; funding includes management reserves
Typical PMI Exam Example
A project has a BAC of $500,000. At the data date, the project has completed work worth $200,000 (EV) and spent $250,000 (AC). What is the cost performance index (CPI)? Answer: CPI = EV/AC = $200,000/$250,000 = 0.8 (over budget).
PMI Exam Traps
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Trap: Confusing BAC with total project funding Reality: BAC is the cost baseline (work budgets + contingency); total funding = cost baseline + management reserves
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Trap: Thinking BAC changes when project performance changes Reality: BAC is fixed at project approval; only EAC recalculates based on performance
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Trap: Assuming BAC equals the sum of all planned value (PV) at completion Reality: BAC IS the sum of all PV; BAC = total PV at project completion
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Trap: Using BAC instead of EAC for forecasting Reality: BAC is the original budget; EAC is the revised estimate based on actual performance
Important PMI Connections
| Related Concept | Relationship Type | Exam Attention Point |
|---|---|---|
| Earned Value (EV) | Compared to BAC | EV represents work completed; BAC represents total planned work |
| Estimate at Completion (EAC) | Calculated using BAC | EAC = BAC/CPI (if current performance continues) |
| Cost Baseline | Contains BAC | BAC is the total of the cost baseline (before management reserves) |
| Management Reserves | Excluded from BAC | Management reserves are added to BAC to determine total funding |
| Planned Value (PV) | Sum equals BAC | At project completion, sum of all PV = BAC |
Quick Review Questions
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A project has BAC = $1,000,000, EV = $600,000, and AC = $750,000. What is the cost variance (CV)?
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If BAC = $2,000,000 and management reserves = $200,000, what are the total funding requirements?
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At 50% completion, EV = $500,000 and BAC = $1,000,000. What is the schedule performance index (SPI) if PV = $600,000?
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A project has BAC = $800,000 and CPI = 0.8. What is the estimate at completion (EAC) assuming current performance continues?
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True or False: BAC includes management reserves.
PMBOK v8 Reference
Section 2.4.2.3 - Develop Budget (Process Group: Planning, Knowledge Area: Cost Management)
The budget at completion (BAC) is the sum of all budgets established for the work to be performed. It is the value of total planned work: the project cost baseline.