How to Calculate Budget at Completion (BAC): Formula & Guide

Project budgets rarely stay static. As a project manager, knowing your original budget plan is critical, but knowing how to measure performance against that plan is what separates success from failure. This is where Budget at Completion (BAC) becomes your most valuable metric.

If you are managing complex deliverables, you need to understand exactly how to calculate BAC to keep your stakeholders informed and your resources balanced. This guide covers the formula, calculation steps, and real-world examples to help you master project cost management.

Budget at Completion (BAC) is the total budget allocated for a project. It represents the sum of all budgets established for the work to be performed. In Earned Value Management (EVM), BAC acts as the cost baseline. It is a static number determined at the beginning of the project and generally does not change unless a formal change control process approves a scope modification.

Unlike complex forecasting metrics, the BAC formula is straightforward. It is a summation of all estimated costs for every activity in the project scope.

The formal mathematical representation is:

$$BAC = \sum_{i=1}^{n} (\text{Cost of Individual Activity}_i) + \text{Contingency Reserves}$$

Where:

• Cost of Individual Activity: The estimated labor, material, and equipment costs for a specific task.

• Contingency Reserves: Budget set aside for identified risks (known unknowns).

Note: BAC typically excludes Management Reserves, which are funds held for unforeseen risks (unknown unknowns).

To calculate BAC accurately, you cannot simply guess a number. You must build it from the bottom up using your Work Breakdown Structure (WBS).

Identify every deliverable required to finish the project. The more granular your WBS, the more accurate your BAC will be.

Estimate the cost for each specific task. You can use historical data or vendor quotes for this.

Calculate a risk buffer. If your total task cost is $100,000 and you identify a 10% risk factor, your contingency is $10,000.

Add the task costs and the contingency reserves together. This final sum is your Budget at Completion.

Imagine you are managing a software development project with four main phases. Here is how you would calculate the BAC:

In this scenario, your BAC is $59,400. This number becomes your baseline. You will measure all future spending, such as your Actual Cost (AC), against this figure.

Before you can use the formula, you need to derive the numbers. Project managers use three primary methods to estimate the costs that feed into the BAC calculation.

This method uses historical data from similar past projects. If a similar website build cost $10,000 last year, you assume the new one will cost roughly the same. This is the fastest method but the least accurate.

This uses a statistical relationship between historical data and other variables.

Example: If painting costs $2.00 per square foot and you have 10,000 square feet, your estimate is $20,000. This is highly accurate for repetitive tasks.

This is the gold standard for calculating BAC. You estimate the cost of individual work packages at the lowest level of detail and "roll them up" to get the total. It is time-consuming but provides the most reliable cost baseline.

Calculating BAC is not just a math exercise. It serves as the foundation for advanced project tracking. Without a clear BAC, you cannot calculate other vital Project Performance Metrics.

The difference between BAC and EAC is often a source of confusion.

• BAC (Budget at Completion): What you planned to spend (The Baseline).

• EAC (Estimate at Completion): What you expect to spend based on current progress (The Forecast).

If your project is over budget, your EAC will be higher than your BAC.

Once you have your BAC and your forecast (EAC), you can calculate the Variance at Completion (VAC) to see if you will finish over or under budget.

$$VAC = BAC - EAC$$

• Positive Result: You are under budget.

• Negative Result: You are over budget.

For those studying for the Project Management Professional (PMP) exam, BAC is a frequent topic. Remember these rules:

Typically, no. BAC includes the estimates for work packages plus contingency reserves (for known risks). Management reserves (for unknown risks) are usually added on top of the BAC to create the Total Project Budget.

BAC should remain static to preserve the integrity of your performance measurement. It should only change if there is a significant change in project scope that is approved through formal change control.

They are related but different. Planned Value (PV) changes throughout the project (e.g., "Planned spending by Month 3"). BAC is simply the final value of PV when the project is 100% complete.

If your Actual Costs exceed your BAC before the work is finished, the project is officially over budget. You must calculate a new Estimate at Completion (EAC) to request additional funds.

Mastering the Budget at Completion (BAC) formula gives you the financial roadmap for your project, but sticking to that map requires precise execution. To ensure your actual costs align with your planned budget, you need a technical partner built for efficiency.

At Modall, we specialize in high-performance product development that scales with your business. From custom web platforms and mobile apps to complex AI integrations, we help you move from concept to delivery without the costly scope creep that destroys budgets. Don't just calculate your success, build it with Modall.