What are the differences between BAC and EAC?

Question

In project cost management, what are the differences between BAC and EAC.

Answer 1

BAC stands for Budget At Completion, EAC stands for Estimate At Completion.

Now BAC is what at first, you thought the project would cost you in your initial project cost plan. BAC is the budget set in the beginning of the project.

EAC, on the other hand, is the estimate of what the project will cost based on the current numbers.

EAC is calculated the following way:

EAC = BAC/CPI . If CPI is above 1, then then project is burning less money than anticipated, so BAC/CPI will be less than BAC, which means the current Estimate At Complete, or EAC < BAC . However, what usually happens is that 0 < CPI < 1, which means that BAC/CPI > BAC, which means that EAC > BAC (project is over budget).

Comments

BAC isn't strictly original budget; BAC can include change orders/mods approved by the client. Also, there is more than one calculation for EAC.  E.g., Estimate At Completion can equal ACWP + (BAC-BCWP), or ACWP + ETC, or ACWP + (BAC-BCWP)/CPI, depending on the type of resources you're dealing with (e.g., labor vs. nonlabor) and the approach decided by the team.  Also, not all companies use the industry standard of CPI greater than 1 to mean less money burned; some companies use the inverse.