Budget at Completion vs Estimate at Completion (BAC vs EAC)
The most common point of confusion in Earned Value Management is the relationship between Budget at Completion (BAC) and Estimate at Completion (EAC). They look similar, they both represent a "total project cost", but they behave in completely opposite ways.
BAC = the cost you planned before the project started. It is fixed.
EAC = the cost you currently forecast to finish. It changes as the project evolves.
Quick Comparison: BAC vs EAC
| Property | BAC (Budget at Completion) | EAC (Estimate at Completion) |
|---|---|---|
| Definition | Total approved baseline budget | Forecasted total project cost |
| When set | Once, at project baseline | Recalculated throughout execution |
| Changes? | Only via formal re-baselining | Yes — updated every reporting period |
| Based on | Planned estimates only | Actual cost + performance indices |
| Formula | Σ (all work package budgets) | BAC / CPI (most common of 4 formulas) |
| PMBOK ref. | 6th Ed. p.263 | 6th Ed. p.264–265 |
At Project Start: BAC = EAC
At the moment a project baseline is approved, BAC and EAC are identical. No work has been performed, no actual costs have been incurred, so the forecast equals the plan. As soon as execution begins and real data appears (AC, EV), EAC starts to diverge from BAC.
What is the difference between BAC and EAC?
The key distinction: BAC represents commitment — what was formally agreed with stakeholders. EAC represents reality — what the project is actually projected to cost based on observed performance.
Consider this example: a software project with BAC = $400,000.
- After 3 months: AC = $130,000, EV = $100,000 (25% complete)
- CPI = EV / AC = 100,000 / 130,000 = 0.769 (over budget)
- EAC = BAC / CPI = 400,000 / 0.769 = $520,156
- VAC = BAC − EAC = 400,000 − 520,156 = −$120,156 (projected overrun)
BAC is still $400,000. EAC is now $520,156. The $120,156 gap is what the project manager needs to explain and manage.
Can BAC change during a project?
Yes, but only through a formal process. BAC changes in two scenarios:
- Approved scope change — Additional work packages are added via change control, increasing (or decreasing) the authorized budget.
- Re-baselining — Senior management formally approves a new cost baseline, typically when the original BAC is no longer achievable and a fresh start is needed. This is a significant governance event.
Cost overruns alone NEVER change BAC. They are reflected in EAC and VAC instead.
What does it mean when EAC exceeds BAC?
When EAC exceeds BAC (VAC is negative), the project is projected to finish over budget. The difference represents the forecasted cost overrun. Project managers must report this to stakeholders and take corrective action to drive CPI closer to 1.0 — which reduces EAC.
Research cited in PMBOK shows that once CPI drops below 0.9, it rarely recovers significantly after the 20% completion mark. This makes early EAC forecasting critical.
When EAC is Below BAC
When EAC is less than BAC, VAC is positive — the project is forecast to finish under budget. This is favorable and represents a budget surplus.
The 4 EAC Formulas and How They Relate to BAC
All four PMBOK EAC formulas reference BAC:
EAC₂ = AC + (BAC − EV) ← one-time variance; future at planned rate
EAC₃ = AC + (BAC − EV) / CPI ← sustained CPI impact (= EAC₁)
EAC₄ = AC + (BAC − EV) / (CPI × SPI) ← schedule pressure adds cost
The relationship between BAC and each EAC determines VAC = BAC − EAC. The formula you choose reflects your assumption about future performance — but all four start from the same fixed BAC.
Summary Table
| Situation | BAC | EAC | VAC | Meaning |
|---|---|---|---|---|
| On track | $500K | $500K | $0 | On budget |
| Cost overrun | $500K | $560K | −$60K | Projected to exceed budget |
| Under budget | $500K | $470K | +$30K | Forecast surplus |
| Re-baselined | $580K | $580K | $0 | New approved baseline |