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Last updated on 2024年5月26日

How do you compare BAC with planned value (PV) and actual cost (AC) in your cost performance index (CPI)?

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Cost reporting is a vital skill for project managers, as it helps them monitor and control the budget and performance of their projects. One of the key metrics used in cost reporting is the cost performance index (CPI), which measures how efficiently the project is using its resources. But how do you compare the budget at completion (BAC) with the planned value (PV) and the actual cost (AC) in your CPI? In this article, we will explain the meaning and calculation of these terms, and how they relate to your project's progress and health.

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Hamed Maged

Planning Manager, Delay Analyst, PMP?, RMP?, PMI-SP?, PMI-ACP?, PMI-PBA?
Ahmed Fikry

Organizational Project Management Advisor | Empowering Organizations to Transform from PMO to VMO | Value Realization |…
Yaman Bdaiwi, MCIArb, MCLDR, MSc, CCM

Projects Control Manager at Al Geemi and Partners Contracting Co. L.L.C

1 What is BAC?

BAC stands for budget at completion, and it is the total amount of money that the project is expected to cost when it is finished. BAC is usually determined at the beginning of the project, based on the scope, schedule, and resources. BAC is a baseline that helps you compare your project's performance against your original plan. You can use BAC to calculate the estimate at completion (EAC), which is the projected cost of the project at its current state.

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Hamed Maged

Planning Manager, Delay Analyst, PMP?, RMP?, PMI-SP?, PMI-ACP?, PMI-PBA?
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The Cost Performance Index (CPI) measures project cost efficiency, calculated as CPI=EV/AC, where Earned Value (EV) is the budgeted cost of work performed and Actual Cost (AC) is the cost incurred. Budget at Completion (BAC) is the total project budget, and Planned Value (PV) is the budgeted cost for scheduled work. A CPI greater than 1 indicates the project is under budget, equal to 1 indicates on budget, and less than 1 indicates over budget.

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Mohammed Fawas

Cost Accountant at TWI Foods Inc.
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Budget at Completion (BAC) is a critical metric in project management that represents the total budgeted cost of the project at its completion. It is the sum of all budgeted costs for all project activities, including labor, materials, equipment, and overhead costs BAC includes all costs that are budgeted for the project, from initiation to completion. This comprehensive view of costs allows project managers to understand the full financial scope of the project. BAC serves as the baseline against which actual costs are compared. By comparing actual costs to BAC, project managers can assess whether the project is on track financially or if adjustments need to be made.

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Michelle Kovalski

FP&A| Modelagem Financeira |Controladoria| | Budget| Custos| Tesouraria | Entusiasta de IA| CNV| Entusiasta em disseminar o conhecimento | Eterna estudante
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BAC (budget at completion) representa o or?amento total previsto para o projeto no momento de sua conclus?o. O BAC é calculado durante a fase de planejamento do projeto e é baseado em uma avalia??o detalhada do trabalho a ser realizado, recursos necessários e cronograma.

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Ahmed Fikry

Organizational Project Management Advisor | Empowering Organizations to Transform from PMO to VMO | Value Realization | Excellence Programs and Innovation Expert | Project Management, Scrum, and Scaled Agile Instructor.
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BAC, Budget at Completion ?? ???????? ??? ????????. ????? ?? ??????? ??????? ???? ??? ???????? ????. ? ??? ???????? ???????? ?? ?????? ??????? ? ??????? ??????? ? ?????? ????????

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2 What is PV?

PV stands for planned value, and it is the amount of work that the project should have completed by a certain point in time, according to the baseline schedule and budget. PV is also known as the budgeted cost of work scheduled (BCWS), and it represents the value of the work that you planned to deliver. You can use PV to calculate the schedule performance index (SPI), which measures how fast the project is progressing compared to the plan.

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Michelle Kovalski

FP&A| Modelagem Financeira |Controladoria| | Budget| Custos| Tesouraria | Entusiasta de IA| CNV| Entusiasta em disseminar o conhecimento | Eterna estudante
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Valor Planejado (PV) é o custo or?ado para o trabalho que deveria ter sido completado até um determinado ponto no cronograma do projeto. Essa métrica ajuda a determinar se o projeto está atrasado ou adiantado em rela??o ao cronograma planejado.

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Ahmed Fikry

Organizational Project Management Advisor | Empowering Organizations to Transform from PMO to VMO | Value Realization | Excellence Programs and Innovation Expert | Project Management, Scrum, and Scaled Agile Instructor.
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PV, Planned Value ?????? ???????. ???????? ???????? ??????? ????? ???????. ??? ?????? ?? ???? ??? ???????? ??? ???????? ?? ???? ??????? ???????. ?????? ???? ???? ??????? ??????? ???% ???? PV = BAC

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3 What is AC?

AC stands for actual cost, and it is the amount of money that the project has spent by a certain point in time. AC is also known as the actual cost of work performed (ACWP), and it represents the cost of the work that you actually delivered. You can use AC to calculate the cost variance (CV), which measures how much the project is over or under budget.

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Ahmed Fikry

Organizational Project Management Advisor | Empowering Organizations to Transform from PMO to VMO | Value Realization | Excellence Programs and Innovation Expert | Project Management, Scrum, and Scaled Agile Instructor.
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AC, Actual Cost ??????? ??????? ??????? ??????? ????? ?? ???? ???? ??. ? ???? ??????? ??? ???? ?????? ???????? ??? ?????? ??????? ??? ???????? ??????? ????????.

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Yaman Bdaiwi, MCIArb, MCLDR, MSc, CCM

Projects Control Manager at Al Geemi and Partners Contracting Co. L.L.C
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Often confused with Earned Value (EV or BCWB), the actual cost (ACWP) is basically the money expended to carry out the project's Works, irrespective of what value is being collected from the Employer against such Works. For example, a concrete casting item for the building columns is being valued on your BoQ as 1,000/m3 and you've casted 10 m3. Therefore, you will be entitled for 10,000 payment from the Employer. However, upon collecting the invoices against this item, you've find out that concrete supplier cost you 300/m3 and the carpentry + steel fixing manpower cost you 500/m3, and finally consumable materials were 300/m3. In this case your EV = 10,000 whereas your AC = (300+500+300)x10 = 11,000. I.e. your spending more than gaining.

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4 What is CPI?

CPI stands for cost performance index, and it is the ratio of the PV to the AC. CPI measures how efficiently the project is using its resources to deliver the planned value. CPI is calculated by dividing the PV by the AC. A CPI of 1 means that the project is on budget, a CPI greater than 1 means that the project is under budget, and a CPI less than 1 means that the project is over budget.

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5 How do you compare BAC with PV and AC in your CPI?

To compare BAC with PV and AC in your CPI, it is essential to understand how these terms relate to each other and to your project's status. For instance, if your PV is equal to your BAC, it means that all planned work has been completed according to the baseline schedule and budget. Your CPI will then be 1, indicating that you are on budget. On the other hand, if your PV is less than your BAC, then your CPI will depend on your AC. If your AC is also less than BAC, it means that you are under budget and your CPI will be higher than 1. However, if the AC is equal to or greater than BAC, then you are over budget and the CPI will be lower than or equal to 1. Lastly, if the PV is greater than the BAC, then more work has been completed than planned according to the baseline schedule and budget. In this case, if the AC is less than or equal to the BAC, then you are under budget and the CPI will be greater than or equal to 1. If the AC is greater than BAC, then you are over budget and the CPI will be less than 1.

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6 How do you use CPI to improve your cost reporting?

CPI is a useful indicator of your project's cost performance, but it is not enough to rely on it alone. To improve your cost reporting, you should monitor and update your CPI regularly and compare it with your baseline and target values. It is also important to identify and communicate any issues or risks that may affect your project's cost performance. You can take corrective action by implementing and tracking changes or adjustments that can help reduce costs, increase efficiency, or deliver more value to stakeholders. Additionally, review and revise your EAC and forecast your project's final cost based on your current CPI and other factors. Finally, report and present your cost performance data and analysis in a clear and accurate manner to your team, sponsors, and clients.

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7 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?

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Cost Reporting

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How do you compare BAC with planned value (PV) and actual cost (AC) in your cost performance index (CPI)?

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1 What is BAC?

2 What is PV?

3 What is AC?

4 What is CPI?

5 How do you compare BAC with PV and AC in your CPI?

6 How do you use CPI to improve your cost reporting?

7 Here’s what else to consider

Cost Reporting

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