Earned Value Management

Budgeted Cost of Work Performed (BCWP)

The Budgeted Cost of Work Performed (BCWP) is the budgeted cost 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 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

Download: Defense Acquisition University (DAU) EVM Gold Card 2020

A contractor usually reports the BCWP on all work packages completed for a project. The BCWP is then compared to 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 to 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 time now (i.e., ACWP) are higher than the earned value at 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 Projects Total Budget

Your project 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 on the progress of a project in terms of cost and schedule. BCMP and BCWS informs project members on where the project stands versus budget. It highlights problems so everyone on the team can address them 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

The Five (5) Main EVM Variables:

AcqLinks and References:

Updated: 6/13/2021

Rank: G1.4

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