Budgeted cost of work scheduled BCWS

Budgeted cost of work scheduled BCWS

Budgeted cost of work scheduled (BCWS)

What is budgeted cost of work scheduled?

Budgeted cost of work scheduled, also commonly shortened to BCWS, is a key project management measure and KPI which is used to understand the planned costs of the project at any point in time.

Budgeted cost of work scheduled is also known as planned value (PV), which is exactly the same in principle, being the 'planned' value of the project at different stages of that project.

Schedules carry a lot of weight for companies in project-based industries, where the approved schedule and the performance in accordance with that timeline dictates whether or not the company makes a profit. A project-based company will typically allocate a certain amount of costs to each day or phase of works, and if these days or phase of works run over schedule, then the budget more often than not follows.

For this reason, ensuring that the project tracks closely with the initially set schedule (and ideally ahead of schedule) is crucial for project success.

Without a clear and accurate marker as to the current state of the schedule, it's almost inevitable that the project does not end on schedule. So let's take a deeper look at the budgeted cost of work scheduled and how this fits into your project management efforts.

Budgeted cost of work scheduled vs. budgeted cost of work performed

Earned value management, which budgeted cost of work scheduled falls under, can be confusing at first glance. Many of the different formulas and components look and sound similar - but the entire system is very logical and relatively easy to grasp.

The most easily confused aspect of the budgeted cost of work world is the difference and relationship between budgeted cost of work scheduled and budgeted cost of work performed (BCWP).

These two terms share the same difference and application as planned value and earned value.

As mentioned, budgeted cost of work scheduled is simply the planned costs of the project up to a specific date, while earned value is the actual amount of value which has been created on the project so far.

Neither of these two measures is to be confused with the actual costs of the project, which simply state and outline how much money has been spent on the project so far.

The easiest way to look at what budgeted cost of work scheduled means in practice is to look at an example - and before we do that, let's just quickly reacquaint ourselves with the budgeted cost of work scheduled formula below.

Budgeted cost of work scheduled

Budgeted cost of work scheduled is one of the simplest earned value formulas, mostly because we actually don't have to be tracking or reconciling any real data from the field.

Budgeted cost of work scheduled is simply derived from multiplying the total budget of the project (or phase of works) and the amount of the project or phase of work which we had planned to have complete at this stage.

For example, let's say we are involved in a construction project with a budget of $5,000,000.

To complete this project 100%, we have scheduled 2 years of work.

Our director comes to us, the project manager, after exactly 1 year and asks us to create a report about our current budgeted cost of work scheduled, and how that relates to our actual performance.

To find our BCWS, we know that at the 1 year mark, we should be 50% complete - because the entire schedule was 2 years.

We also know that our budget at completion is constant, and is $5,000,000.

We can multiply these numbers together to find our budgeted cost of work scheduled.

BCWS = % project complete (planned) x Budget at completion (BAC) = 50% x $5,000,000 = $2,500,000

At the 1 year mark, our budgeted cost of work scheduled is $2,500,000.

Using BCWS

The director and PM care about this number, but the real strength of earned value analysis is in comparing this number to our actual performance.

To 'use' budgeted cost of work scheduled, we need to compare this number to our earned value or budgeted cost of work performed.

To layer on top of the current example, let's imagine that we have actually completed 45% of the project at the one year mark. This means that our budgeted cost of work performed is less than what we had planned to the tune of:

BCWP = % of project complete (actual) x BAC = 45% x $5,000,000 = $2,250,000

As we can see, our performed 'work' equates to $2,250,000 in work, while we had planned to generate $2,500,000 in work. This shows that we are currently behind schedule and gives is a schedule variance of $250,000.

For most analyses, the final piece of the puzzle focuses on the other pillar of project management - costs.

If we are behind on schedule, we want to understand how we are performing on a budget basis. If we are behind on schedule and over budget, then we have a schedule and cost problem.

To understand our cost performance, we can look at our cost variance and cost performance index.

To calculate these numbers, we need to find our current actual costs. At the same point in time of our budgeted cost of work scheduled calculation, we have spent $2,300,000.

Now we can work out our cost variance:

Cost variance = Earned value - Actual costs = $2,250,000 - $2,300,000 = -$50,000

From the above, we also know that we are $50,000 over budget. So we are behind schedule, and over budget, which means we have a lot of work to do.

There are a number of forecasting metrics which we can then use to improve our budget and schedule forecasts, which you can learn more about in this extensive help article.

Projects can be complex beasts, and keeping them on schedule and on budget in the face of internal and external forces can be difficult at the best of times.

Budgeted cost of work scheduled is an important ingredient to ensuring we keep our eyes on the prize through all phases of a project.

People in 100+ countries use this software to keep their projects on schedule and on budget.

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Sitemate is flexible project managament software which enables companies in the industries to streamline their projects, teams and activities.

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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