Every project manager needs a way to measure whether a project is on budget. Two of the most important earned value metrics are the Estimate at Completion (EAC) and the Budget at Completion (BAC). Although both relate to project costs, they serve different purposes.
This blog post explains what these terms mean, shows you how to calculate them, compares them with examples, and offers tips to use them effectively.
Let’s get started.
Key Takeaway
- EAC predicts the total cost of finishing a project. It considers actual costs incurred so far and forecasts the cost of the remaining work.
- BAC is the original approved budget. It is set during planning and does not change unless the scope changes. It is the total authorized budget for accomplishing the project scope of work.
- The difference matters. EAC tells you where costs are heading; BAC tells you where they were supposed to be. Comparing them helps you spot cost overruns early.
What is Estimate at Completion (EAC)?
Estimate at Completion, or EAC, is a forecast of the total cost of a project when it finishes. Project managers use it to predict how much money they will spend based on current performance. It helps them decide whether the project will stay within budget or go over.
EAC changes as the project progresses. It uses actual cost data and performance trends. This makes it more reliable than the original budget.
You can use four formulas to calculate EAC.
The first formula is:
EAC = AC + ETC
Use this when the original estimate is no longer valid. You create a new estimate for the remaining work.
The second formula is:
EAC = BAC ÷ CPI
Use this when cost performance is stable. It assumes the current cost efficiency will continue.
The third formula is:
EAC = AC + (BAC – EV)
Use this when past problems were temporary. It assumes future work will follow the original plan.
The fourth formula is:
EAC = AC + (BAC – EV) ÷ (CPI × SPI)
Use this when both cost and schedule affect performance. It gives a more careful forecast.
EAC helps you control costs early. If EAC exceeds BAC, you need to act fast.
What is Budget at Completion (BAC)?
Budget at Completion (BAC) is the total planned cost of a project. It shows how much money you expect to spend from start to finish. Project managers set BAC during the planning phase. They calculate it by adding the cost of all tasks and work packages.
BAC helps track project performance. You compare it with the actual cost to see if you are over or under budget. If costs increase, BAC stays the same unless the scope changes.
There is no complex formula to calculate BAC. It is simply:
BAC = Total Planned Cost of the Project
For example, if all project tasks cost $50,000, then the BAC is $50,000.
EAC Vs BAC: Key Differences
Although both metrics relate to project costs, they are not interchangeable. The chart below summarizes the main differences:
- Nature of the metric. BAC is established at the start and remains constant; EAC evolves as the project progresses.
- Purpose. BAC sets the budget baseline; EAC predicts the final cost based on current performance. Comparing the two helps identify cost overruns early.
- Calculation. BAC is calculated once as the sum of all planned costs; EAC uses formulas that incorporate actual cost, earned value, and performance indices.
- Timing. BAC is determined during planning and used throughout execution; EAC is updated regularly as actual costs and performance data become available.
Why EAC and BAC Matter for Project Success
Accurate cost forecasting is vital to delivering projects successfully. Apollo Technical’s 2026 compilation of project management statistics reveals that only 43% of projects finish within their original budgets, and that large IT projects average a 27% cost overrun. These numbers highlight how easily costs can spiral when budgets are not actively monitored. By comparing EAC to BAC, you can spot trends and take corrective actions before overruns become unmanageable. Without this comparison, you may not realize that your budget is slipping until it is too late.
Cost overruns impact more than just the bottom line. They erode stakeholder trust, reduce profit margins, and can lead to project cancellation. In regulated industries such as construction or energy, exceeding the approved budget might even violate contractual or legal obligations. Conversely, projects that stay on budget free up funds for other initiatives, strengthen organizational credibility, and improve your reputation as a reliable project manager.
Best Practices for Using EAC and BAC
Update forecasts regularly. Review your EAC at least monthly, or more often for high-risk projects. Use rolling wave planning to refine estimates as more information becomes available.
Monitor performance indices. Keep an eye on the CPI and SPI. A sustained CPI below 1.0 signals cost overruns; an SPI below 1.0 indicates schedule delays. Early detection helps you take corrective action before the problem escalates.
Communicate with stakeholders. Share EAC and BAC comparisons with sponsors and team members. Transparent communication builds trust and encourages proactive problem-solving.
Link to other EVM metrics. Use variance analysis and the To-Complete Performance Index (TCPI) to determine the required performance to meet the BAC. For example, TCPI = (BAC – EV) ÷ (BAC – AC) tells you the efficiency required to finish on budget.
Use the right tools. Modern project management software can automate EAC calculations, track variances, and generate dashboards. Consider using tools recommended in internal posts, such as cost performance index (CPI) and earned value management, to deepen your understanding.
FAQs
Q1. Is BAC always equal to EAC at the start of a project?
Yes. At project kickoff, actual cost and earned value are both zero, so EAC equals BAC. Differences emerge as the project progresses.
Q2. What does it mean if my EAC is higher than my BAC?
It signals that your project is trending over budget. You should investigate the cause, reassess remaining work, and consider corrective actions.
Q3. Can BAC change during a project?
It should remain fixed unless there is an approved change in scope. Changes to the scope require revising the BAC through formal change control.
Q4. How often should I recalculate EAC?
Recalculate EAC whenever you update project performance data. Weekly or monthly reviews are common. The frequency depends on project size and risk.
Q5. What if my CPI is above 1?
A CPI above 1 means you are spending less than planned for the value earned. In that case, your EAC may be lower than your BAC, signaling that you are under budget.
Summary
EAC and BAC help you control project costs and make better decisions. BAC gives you the original budget, while EAC shows the expected final cost. By comparing them, you can see if your project is on track or going over budget. This helps you take action early and avoid problems later. When you use these metrics regularly, you improve cost control and project success. Good planning and monitoring make a big difference in managing project finances.
This topic is important from a PMP exam point of view.
I am Mohammad Fahad Usmani, B.E. PMP, PMI-RMP. I have been blogging on project management topics since 2011. To date, thousands of professionals have passed the PMP exam using my resources.
