The Budgeted Cost of Work Performed (BCWP) is the budgeted cost (Dollars) of the value of work that has actually been accomplished or completed to date. It can be used to address the entire project, individual task, or work packages. It’s compared against the Actual Cost of Work Performed (ACWP). BCWP is a tool used in Earn Value Management (EVM) and is also called Earned Value.
Definition: Budgeted Cost of Work Performed (BCWP) is the earned value of completed work in terms of the work’s assigned budget.
BCWP = % Complete (Actual) x Project Budget
Reporting Budgeted Cost of Work Performed (BCWP)
A contractor usually reports the BCWP on all work packages completed for a project. The BCWP is then compared to the Budgeted Cost of Work Scheduled (BCWS) to determine if the project is behind or ahead of where it’s projected to be. If the contractor has not completed all the scheduled work packages on time, then the BCWP will be less than the BCWS.
A contractor also reports the cumulative ACWP for the work packages that have been completed. The difference between the BCWP and the ACWP is the Cost Variance (CV). If the actual costs at the time now (i.e., ACWP) are higher than the earned value at the time now (i.e., BCWP), we know that the contractor is currently overrunning cost and that the contractor’s Estimate at Completion (EAC) may be higher than the Budget at Completion (BAC).
Benefits of Budget Cost of Work Performed (BCWP) for any Project Team are:
- Provides a Baseline: Allows project personnel to compare actuals vs. planned
- Projects Future Costs: Highlights when projects will exceed costs.
- Identifies Issues: Highlights issues in budget vs. work completion for project personnel.
Steps to Calculating Budget Cost of Work Performed (BCWP) Cost Variance
Step 1: Develop your Project’s Total Budget
Your project’s total budget will be the total costs needed to complete the project, including labor, material, incidentals, and operations. Now you divide your project into many phases and assign a total budget for each phase. This breakdown of cost per phase is the foundation of BCWS.
Step 2: Track your BCWS
In this step, you track your BCWS by applying the BCWS equation below against a point in time.
BCWS = % Complete (Planned) x Project Budget
Step 3: Track your Budgeted Cost of Work Performed (BCWP)
The next step is to track the budgeted cost of work performed (BCWP) tracks versus where you are on the budget.
BCWP = % Complete (Actual) x Project Budget
Step 4: Determine the Cost Variance (CV)
In this step, you compare both BCWS and BCWP to determine the Actual Cost of Work Performed (ACWP) to determine the Cost Variance (CV) in your project quality plan. This will project personnel if the project is over budget or under budget at any point in time.
Cost Variance = BCWP – ACWP
Step 5: Communicate with key stakeholders
The overall goal of any Earned Value is to inform project members and stakeholders of the progress of a project in terms of cost and schedule. BCMP and BCWS inform project members of where the project stands versus the budget. It highlights problems so everyone on the team can address them and compensate for any shortfalls.
Step 6: Review at project completion
In the final step, an assessment should be completed comparing the actual cost of each phase to the initial planned cost. This will help identify issues but also help in developing lessons learned for the next project planned. A few of the reasons that project overrun are:
- Not enough time allowed for initial planning
- Funding instability
- Requirements Creep
- Lack of detailed information in the beginning
- Missing budget items
- Inefficient resource planning
What to Know When Calculating Budgeted Cost of Work Performed (BCWP)
When calculating the Budgeted Cost of Work Performed (BCWP) in Earned Value Management (EVM), both the contractor and program manager should be familiar with the following key concepts and considerations:
- Work Breakdown Structure (WBS): The project should have a well-defined and detailed WBS, which breaks down the project scope into smaller, manageable tasks. The WBS forms the basis for tracking and measuring progress.
- Planned Value (PV) or Budgeted Cost of Work Scheduled (BCWS): PV represents the authorized budget for the work scheduled to be completed up to a specific point in time. It is the value of the work that was originally planned to be accomplished at a given point in the project schedule.
- Earned Value (EV) or Budgeted Cost of Work Performed (BCWP): EV is the value of the work actually performed up to a specific date. It is a measure of the physical progress made on the project and is typically expressed in monetary terms.
- Actual Cost (AC) or Actual Cost of Work Performed (ACWP): AC is the total cost incurred to perform the work up to a specific point in time.
- Earned Value Measurement Methods: There are different methods for measuring EV, such as 0/100, 50/50, 20/80, or percentage complete. The selected method should be consistently applied and appropriate for the nature of the work being performed.
- Data Collection and Integration: Accurate and timely data collection is essential for EVM. The contractor and program manager should ensure that actual costs and progress data are consistently, accurately collected, and integrated into the EVM system.
- Performance Indices: EVM uses several performance indices to assess the project’s health. The key ones are:
- – Cost Performance Index (CPI): CPI = EV / AC. A CPI greater than 1 indicates cost efficiency, while a CPI less than 1 indicates cost overrun.
– Schedule Performance Index (SPI): SPI = EV / PV. An SPI greater than 1 indicates schedule efficiency, while an SPI less than 1 indicates schedule delays.
- Variance Analysis: Contractors and program managers should conduct variance analysis to understand the reasons for any cost or schedule variances. This analysis helps identify areas needing corrective actions.
- Forecasting: EVM enables project managers to forecast the final cost and schedule performance based on the project’s current performance. Understanding the trends and making data-driven forecasts is essential for effective project management.
- Management Reporting: Regular and concise EVM reports should be prepared and communicated to stakeholders. These reports should highlight the project’s health, performance trends, and any required corrective actions.
- Corrective Actions: Based on the EVM analysis, contractors and program managers should take timely corrective actions to bring the project back on track if there are any deviations from the baseline.
The Five (5) Main EVM Variables:
- BCWS = Budgeted Cost of Work Scheduled
- BCWP = Budgeted Cost of Work Performed
- ACWP = Actual Cost of Work Performed
- BAC = Budget at Completion
- EAC = Estimate at Completion
AcqLinks and References:
- Defense Acquisition Guidebook (DAG)
- DoD Earned Value Management Implementation Guide (EVMIG)
- DOE EVMS Gold Card – Feb 2019
- DAU EVM Gold Card 2020