Budgeted cost of work performed

Budgeted cost of work performed

Budgeted cost of work performed (BCWP)

What is budgeted cost of work performed?

Budgeted cost of work performed (BCWP) is a very commonly used project management tool, which is more often known as and talked about as earned value.

Budgeted cost of work performed is the budgeted cost of the work which has been performed in carrying out a scheduled task in a specific time period. It's a powerful tool because it enables project managers and companies to understand how they are performing against the work which was scheduled.

If the outcomes of your BCWP calculations are 'negative', then the company or PM will look for ways to get the project back on track. If the outcomes of your BCWP are positive, then the team will look to continue moving forward as planned.

How BCWP interacts with your other key project measures

Budgeted cost of work performed has a similar set of 'measures' to the more common earned value metrics.

Along with BCWP, a project manager using this framework will also work closely with the budgeted cost of work scheduled (BCWS), also known as planned value, and the actual cost of work performed (ACWP), which is identical to actual costs (AC).

Why do some companies use budgeted cost of work performed? It's basically just a preferred naming convention. The calculations and findings of this approach will be the same as in earned value, but some project managers and companies have adopted this language and these terms.

If you want to learn more about earned value management as an all-encompassing effort, we have plenty of helpful articles here.

 

Budgeted cost of work performed example

To take a look at a budgeted cost of work performed example, we need to re-visit our BCWP formula - which is of course the same as EV.

When we look at the actual equation below, it's easy to see why the language does actually make more sense than 'earned value'.

The first side of our equation is the amount of work which has been performed so far or our % of work completed.

On the other side, we have our budget at completion (BAC) or overall budget. When combined, we naturally have our budgeted cost of work performed so far.

Budgeted cost of work performed BCWP

Now that we know how to calculate our budgeted cost of work performed and the inputs we are looking for, we can get to work.

Let's assume we are working on a $100,000 residential construction project. The project is scheduled to last for 6 months, and we are already 55% of the way there.

At the 3 month mark, we want to understand our current budgeted cost of work performed. With these simple numbers, we can work out our BCWP.

BCWP = % of work complete x BAC = 55% x $100,000 = $55,000

This $55,000 number alone tells us that we have generated $55,000 dollars in value so far. On the surface, this appears to be a good thing. We look like we are ahead of schedule.

But as with most numbers, we also need to see how efficient we were at getting there. To do this, we would want to look at our actual cost of work performed, and then measure our cost performance index.

As you can see from this example, budgeted cost of work performed is straight forward to find, and all companies should be taking advantages of these formulas and practices.

The hardest part of finding and using your budgeted cost of work performed and project analysis is staying on top of your work packages and the exact % of work completed, as well as your actual costs. This can be very tricky for companies who don't have smart ways for managing their information and resources.

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About Lance Hodgson

Lance is the Head of Marketing & Growth at Sitemate. His aim is to bring awareness to a brighter future for the industries where people spend their time doing better work and companies deliver on time and on budget.

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