What BAC actually is
Budget at Completion is the total cost the project is authorised to spend on the agreed scope. It is built bottom-up — the planned value (PV) of every work package in the Work Breakdown Structure, summed to the project level — and then frozen at baseline. Once frozen, BAC is the denominator behind almost every Earned Value Management calculation that matters: Estimate at Completion divides BAC by Cost Performance Index, Variance at Completion subtracts EAC from BAC, To-Complete Performance Index measures the efficiency needed across the remaining work to land at BAC. If BAC drifts, every downstream metric drifts with it.
A few things BAC is not. It is not the contract value — contract value usually sits above BAC because it includes the supplier's margin and risk loading. It is not the funded position — funding may be released in tranches that, taken in isolation, are less than BAC. And it is not the same as the project sponsor's management reserve, which is held outside the performance measurement baseline and is not part of BAC. BAC is the line the project manager is managing against; management reserve is the buffer the sponsor draws on when BAC has to grow.
The formula
The core formula is mechanical: BAC equals the sum of the planned value of every work package in the performance measurement baseline. In notation: BAC = Σ PVᵢ over all i in the baseline. There is no integration over time — BAC is the time-integrated number, the area under the planned-value S-curve at the project completion date. If you have the cumulative PV curve, BAC is simply its terminal value.
Two adjustments are worth flagging. First, BAC normally excludes management reserve. The PMI Practice Standard for EVM is explicit on this: management reserve is held by the sponsor for unidentified risks and sits outside the PMB; only contingency that has been distributed to control accounts is inside BAC. Second, some EVMS implementations distinguish between Distributed Budget (work packages that have been planned in detail) and Undistributed Budget (authorised work that has not yet been broken down to work-package level). BAC includes both. UB that is still sitting on the project at gate review is a finding, not a feature — reviewers expect distributed budget to dominate by late in the planning effort.
Worked example
Take a small electrical commissioning project broken into four control accounts. Control Account A — site setup and temporary supplies — has a planned value of £180,000. Control Account B — primary equipment install — has a planned value of £420,000. Control Account C — secondary distribution and testing — has a planned value of £290,000. Control Account D — handover, commissioning and demobilisation — has a planned value of £110,000. The Budget at Completion is the sum of these four: BAC = £180k + £420k + £290k + £110k = £1,000,000. The contract value is £1,150,000; the £150,000 difference is the contractor's margin and risk loading and sits above BAC. The sponsor is holding a further £100,000 of management reserve, also above BAC. The £1,000,000 BAC is the number against which the project will be performance-measured.
Suppose the project is six weeks in and reporting shows: planned value to date PV = £350,000; earned value EV = £315,000; actual cost AC = £360,000. The Cost Performance Index is CPI = EV ÷ AC = 315,000 ÷ 360,000 = 0.875. The Schedule Performance Index is SPI = EV ÷ PV = 315,000 ÷ 350,000 = 0.900. The simplest Estimate at Completion using EVM efficiency is EAC = BAC ÷ CPI = 1,000,000 ÷ 0.875 = £1,143,000. Variance at Completion is VAC = BAC − EAC = 1,000,000 − 1,143,000 = −£143,000 — a forecast £143,000 overspend.
The To-Complete Performance Index sharpens the diagnostic. TCPI = (BAC − EV) ÷ (BAC − AC) = (1,000,000 − 315,000) ÷ (1,000,000 − 360,000) = 685,000 ÷ 640,000 = 1.07. The remaining work needs to be delivered at a CPI of 1.07 to land at BAC, against a historical CPI of 0.875. The PMI rule of thumb is that a TCPI more than 0.10 above the historical CPI is a strong signal that BAC is no longer achievable — and 1.07 against 0.875 clears that threshold with room to spare. The honest forecast is the EAC of £1,143,000, and the sponsor will need to authorise either a scope reduction, a draw on the £100,000 management reserve, or a formal change that grows BAC.
When BAC changes — and when it shouldn't
BAC is frozen at baseline and only changes through formal scope change. The two legitimate triggers are: (1) an approved scope change that adds or removes work from the performance measurement baseline, and (2) a transfer of management reserve into the PMB to fund a materialised risk that has been incorporated into scope. Both should result in a baseline revision number, a documented change, and a re-published PMB. If BAC is changing without either, the change-control discipline has broken down and the EVM metrics are no longer reliable.
The illegitimate version is the rolling re-plan. Work packages are quietly re-budgeted to absorb cost variances, the planned value curve is reshaped to hide the schedule slip, BAC stays the same on paper while the underlying baseline drifts week by week. The CPI and SPI numbers look stable because the baseline is moving in lock-step with the actuals. This is the failure mode that gets flagged by every external EVMS review the author has seen on UK defence and infrastructure work — and it is the reason that mature EVMS implementations log every change to the PMB through formal Baseline Change Requests, with the cumulative change history visible on the cost report.
Four housekeeping failures that quietly invalidate BAC
First — contingency creeping into BAC unannounced. Contingency budget that sits in a contingency account above the PMB is fine; contingency that gets distributed into control accounts to soak up risk-driven cost increases without a corresponding scope change is not. The CPI and the EAC drift in opposite directions and the project looks healthier than it is. Reviewers test for this by reconciling the original BAC, the distributed contingency to date, and the management reserve drawn — the three should add up to the current authorised total.
Second — undistributed budget that never gets distributed. UB is a placeholder for work that has not yet been broken down to control-account level. It is a temporary feature of the early planning effort. UB still sitting on the project at month six of a twelve-month programme means the work has not actually been planned — the PV curve in that area is a fiction. BAC technically includes the UB but the earned-value metrics for that work are meaningless until distribution happens.
Third — work-package "rubber budgets". A work package whose budget is regularly transferred to other packages to balance variances has stopped being a unit of management and become a shock absorber. The PMI standard and the ANSI/EIA-748 guidelines both require that control accounts are stable units that the EVMS can meaningfully report against; rubber-budget packages destroy that stability. The fix is to manage at the control-account level and put a formal change through any time a work-package transfer is needed.
Fourth — BAC that excludes elements of the contracted scope. Long-lead procurement is the usual offender — items ordered against the contract but parked outside the PMB because they don't fit the cost-breakdown structure neatly. The EV reporting then earns against a BAC that doesn't include all the work, the CPI looks fine, and the cost report quietly understates the committed position by the value of the parked items. Reviewers reconcile BAC to the contract scope as the first thing they do; on a well-run programme the two should be one keystroke apart.
How SOMA supports BAC and the PMB
SOMA Project Controls works on Budget at Completion and the underlying Performance Measurement Baseline in three engagement shapes. The first is baseline assurance — a structured review of the PMB at the point it is being frozen, checking that BAC reconciles to the contracted scope, that distributed and undistributed budget are correctly classified, that contingency and management reserve sit in the right places, and that the work-package structure is stable enough to support meaningful EVM. The second is in-flight EVMS health checks — looking specifically at the four housekeeping failures above, identifying whether BAC has drifted, and recommending the change-control discipline to put it back on a defensible footing. The third is independent EAC and VAC calculation for sponsor reporting — giving the sponsor a number they can defend, calculated against a BAC whose integrity has been independently verified.