Value Completion Business: BAC, EV, EAC, and Performance Measurement

PMBOK v8 Definition

Budget at Completion (BAC) is "the sum of all budgets established for the work to be performed." BAC represents the total planned value (PV) for the entire project and serves as the cost performance baseline against which actual performance is measured. Earned Value (EV) is "the measure of work performed expressed in terms of the budget authorized for that work," representing the value of completed work at the data date.

Why It Matters for the Exam

Value completion concepts (BAC, EV, AC, EAC, ETC) appear in approximately 15-20% of cost management and monitoring/controlling questions on the PMI exam. PMI frequently tests your ability to interpret earned value data, calculate variances, and forecast project outcomes—especially in situational questions where you must determine whether a project is over budget, behind schedule, or both.

Key Points to Remember (for the exam)

• BAC Definition: The total approved budget for all work; also called the "project cost baseline" and "performance measurement baseline (PMB)"
• EV vs. PV: EV is the budgeted value of completed work; PV is the budgeted value of planned work at the data date
• EAC Formula: EAC = AC + ETC (actual costs to date plus estimate to complete remaining work)
• ETC Definition: "The expected cost to finish all the remaining project work"
• Common Confusion: EV is NOT actual cost—EV uses budgeted rates for completed work, while AC tracks actual dollars spent
• BAC Relationship: The total PV for the project equals BAC; BAC does not change unless a formal change request is approved
• Measurement Rule: "EV measured cannot be greater than the authorized PV budget for a component"

Typical PMI Exam Example

A project has a BAC of $500,000. At the data date, the team has completed 40% of the work. The planned value at this point was $250,000, and actual costs incurred are $180,000. What is the earned value? Answer: EV = 40% × $500,000 = $200,000. The project has earned $200,000 worth of work against a planned $250,000 (behind schedule) and actual costs of $180,000 (under budget relative to work completed).

PMI Exam Traps

• Trap: Confusing EV with AC (thinking EV represents money spent)

  • Reality: EV is the budgeted value of work completed; AC is the actual cost incurred for that work

• Trap: Assuming BAC equals the total project budget including contingency reserves

  • Reality: BAC is the cost baseline (performance measurement baseline), which excludes management reserves

• Trap: Calculating EV as a percentage of AC instead of BAC

  • Reality: EV = % complete × BAC (not × AC)

• Trap: Thinking EAC replaces BAC as the new budget

  • Reality: EAC is a forecast; BAC remains the baseline unless formally changed through integrated change control

Important PMI Connections

Quick Review Questions

1. A project has BAC of $1,000,000. Work completed represents 60% of the total scope. Planned value at the data date is $700,000. What is the earned value?

2. What is the relationship between BAC and the performance measurement baseline (PMB)?

3. If a project's EAC is $850,000 and AC is $320,000, what is the ETC?

4. Can EV ever exceed the authorized PV budget for a component? Why or why not?

5. A burn chart shows work remaining in a timebox. How does this visual relate to earned value management concepts?

PMBOK v8 Reference

Section 2.7.3 - Data Representation (Burn Chart definition) Section 4.5 - Monitoring and Controlling Process Group (Earned Value Management) Glossary definitions: Budget at Completion (BAC), Earned Value (EV), Actual Cost (AC), Estimate at Completion (EAC), Estimate to Complete (ETC), Planned Value (PV)