Budget at Completion versus Variance at Completion (CONCEPT 42)

Budget at Completion versus Variance at Completion (CONCEPT 42)

Budget-at-Completion-vs-Variance-at-Completion

This is our 42nd post in our Project Management Professional (PMP)® Concepts Learning Series

Each post within this series will present a comparison of common concepts that appear on the PMP and Certified Associate in Project Management (CAPM)® exams.

Budget at Completion versus Variance at Completion

The budget at completion (BAC) is determined at the start of the project. As the project progresses the BAC may need to be revisited based on the project forecast (the estimate at completion – EAC).

As PM you will be responsible for communicating regarding the BAC, the EAC, and the resulting variance at completion (VAC).

Budget at Completion

Budget at completion (BAC) is the total anticipated and budgeted spending for the project based on the project estimates and assumptions.

Variance at Completion

The variance at completion is determined by subtracting the EAC from the BAC:

VAC = BAC – EAC

A negative VAC indicates that the project is forecasted to not complete with the approved budget. A negative VAC may require either an additional funding allocation or the elimination of some of the project scope.

A positive VAC indicates the project will not utilize the allocated budget. This may allow for additional components to be added to the scope of the project.

Example

The bathroom remodeling project has an approved budget (BAC) of $1,500. Based on your analysis, the forecast (EAC) is $1,885.

VAC = $1,500 - $1,885 = ($385) <-- Indicates the project will exceed the budget by $385.

Summary

Variance at completion (VAC) is a comparison of the original budget at completion (BAC) and the revised forecast (EAC). A negative VAC is an indicator that the project may exceed the BAC.

See all posts in our PMP Concepts Learning Series

Comments (1)

Llewellyn Holloway's picture
Llewellyn Holloway
says:

This is a great explanation, helps me to understand budget after completion and how it's applied to earned value management.

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