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Budgeted Cost for Work Performed (BCWP)

APMT 011

DAU GLOSSARY DEFINITION

A measurement of the work completed (in the context of Earned Value Management (EVM)). BCWP is the value of work performed, or “earned,” when compared to the original plan, that is, the Budgeted Cost of Work Scheduled (BCWS). The BCWP is called the Earned Value.

Alternate Definition

The Budgeted Cost for Work Performed (BCWP) is the value of completed work expressed as the value of the performance budget assigned to that work. The sum of the budgets for completed work packages and completed portions of open work packages, plus the applicable portion of the budgets for level of effort and apportioned effort. May be expressed as a value for a specific period or cumulative to date.

Alternate Definition Source

Earned Value Management System Interpretation Guide (EVMSIG) (14 Mar 2019)

General Information

The budgeted cost for work performed, or BCWP, is the dollarized (budgeted) value of all work actually accomplished in a given period of time. The variable is also called Earned Value (EV) and symbolizes the completion of work. BCWP is not 'earned' until the work is completed.

 

 

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 BCWP and its relationship with the other independent variables and two key EVM metrics derived from these variables.

 

Under EVM industry standard 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, MR is not part of the PMB until it is used, and thereby, applied to the PMB.

 

The principle of Earned Value (EV) is that at any time during the performance of the contract, say Time Now, the actual performance of the contractor can be compared to the 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 EV. If the contractor has not completed all the scheduled work packages to time now, then the BCWPc will be less than the BCWScum, representing a “monetized” indication that the contractor is behind schedule, known as Schedule Variance (SV). 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 Critical Path Method (CPM)) in conjunction with the 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 work packages that have been completed. 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), we know that the contractor is currently over running cost and that the contractor’s Estimate at Completion (EAC) may typically be higher than the BAC.

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