U.S. flag

An official website of the United States government

Dot gov

Official websites use .gov
A .gov website belongs to an official government organization in the United States.

Https

Secure .gov websites use HTTPS
A lock () or https:// means you’ve safely connected to the .gov website. Share sensitive information only on official, secure websites.

Breadcrumb

  1. Home
  2. Actual Cost of Work Performed (ACWP)

Actual Cost of Work Performed (ACWP)

DAU GLOSSARY DEFINITION

The costs actually incurred and recorded in accomplishing the work performed within a given time period.

Alternate Definition

The Actual Cost of Work Performed (ACWP) are the costs actually incurred and recorded in the Earned Value Management System (EVMS) for accomplishing the work performed within a given accounting period. ACWP reflects the applied costs. It may be expressed as a value for over a specific period or cumulative to date.

Alternate Definition Source

DoD Earned Value Management System Interpretation Guide (EVMSIG)

General Information

The actual cost of work performed, or ACWP, is the cost actually incurred and recorded in accomplishing the work performed within a given accounting period and is accumulated reported over time. The ACWP is reported by the contractor’s accounting system in accordance with generally accepted accounting procedures. Actual costs include direct costs and allocated indirect costs (overhead, general and administrative, etc.). ACWP isoften simply called Actual Cost.

Figure 1

The Defense Acquisition University (DAU) identifies five independent Earned Value Management (EVM) variables: BCWS, BCWP, ACWP, BAC, and EAC. All earned value metrics are derived from these five variables. The chart in Figure 1 can be used to visually represent ACWP and its relationship with the other independent variables and two key EVM metrics derived from these variables.

Under EVM industry standard ANSI/EIA-748, companies are expected to plan and organize their work efforts into small work packages, typically 30 to 60 days in duration. These work packages are related to each other by an Integrated Master Schedule (IMS). For each work package, the contractor determines a budgeted cost for completing that work and sets a date for starting and completing the work package.

When arrayed over the period of performance for the contract, the budgeted work packages combine to form a time-phased Performance Measurement Baseline (PMB) curve. As shown in Figure 1, at the end of the contract, the PMB terminates at the Budget at Completion (BAC). At any point in time during the period of performance of the contract, this curve represents the cumulative total of the Budgeted Cost for Work Scheduled (BCWScum) for the contract. A contractor will not budget the entire amount of the contract cost, or the Total Allocated Budget (TAB), but will reserve some budget as Management Reserve (MR) for tasks that may need to be added later (i.e. realized risks/unknowns within the currently authorized specific scope of work in the contract). In other words, Management Reserve (MR) is not part of the PMB until it is used, and thereby, applied to the PMB.

The principle of earned value is that at any time during the performance of the contract,Time Now, the actual performance of the contractor can be compared to the plan (Performance Measurement Baseline - PMB), and conclusions drawn about the contractor’s performance with respect to cost and schedule.

The contractor reports the budgeted cost for all work packages completed for the contract to time now. This is the cumulative Budgeted Cost for Work Performed (BCWPcum), or earned value. The comparison of the work completed (BCWPcum) and the scheduled work (BCWScum) represents a 'monetized' indicator known as the Schedule Variance (SV). If the contractor has not completed all the scheduled work packages to time now, then the BCWPcum will be less than the BCWScum resulting in a negative Schedule Variance (SV). Similarly, if more work packages had been completed (BCWPcum) than; planned (BCWScum) the Schedule Variance (SV) would be positive. It is important to understand that we cannot infer from EVM data alone the actual time that the contractor is behind schedule. We would have to use other analysis tools (e.g., network techniques such as the Critical Path Method) in conjunction with the Integrated Master Schedule (IMS) to forecast when the contract will be complete.

In addition to reporting the BCWPcum, the contractor also reports the cumulative Actual Cost of Work Performed (ACWPcum) for the actual costs that have been accumulated in the contractors accounting system as of the same reporting period (time now). The difference between the BCWPcum and the ACWPcum is the Cost Variance (CV). If the actual costs at time now (i.e. ACWPcum) are higher than the earned value at time now (i.e. BCWPcum),the contractor is over running cost. If the ACWPcum is less than the BCWPcum, the contractor costs are under running. If the contractor is over running cost it is expected that the calculated Estimate at Completion (EAC) will be higher than the BAC.

Courses