BCWP (Budgeted Cost Of Work Performed)

What is BCWP (Budgeted Cost Of Work Performed)?

Budgeted Cost of Work Performed (BCWP), often referred to as Earned Value (EV), is a key performance indicator (KPI) used in project management, particularly in government contracting. It represents the value of work completed as of a specific point in time, expressed in terms of the originally budgeted cost for that work. BCWP is a crucial element of Earned Value Management (EVM), which is frequently required on larger government contracts to provide insight into project performance.

Definition

BCWP is a measure of the actual work accomplished compared to the planned budget. It answers the question: "What is the budgeted cost of the work we have actually completed?". It is a critical component of Earned Value Management (EVM) systems, often mandated by government agencies for projects exceeding certain dollar thresholds (as outlined in regulations such as the Federal Acquisition Regulation (FAR) and agency-specific supplements). BCWP is used to calculate other important EVM metrics, such as Schedule Variance (SV) and Cost Variance (CV), providing a comprehensive view of project health and enabling proactive management decisions. Accurate tracking and reporting of BCWP are essential for government contractors to ensure compliance, maintain transparency, and demonstrate effective project management.

Key Points

• Earned Value Metric: BCWP represents the earned value of the project, i.e., the value of completed work in terms of the approved budget.
• Variance Calculation: It is used to calculate variances, which indicate deviations from the planned schedule (Schedule Variance - SV) and budget (Cost Variance - CV).
• Performance Measurement: BCWP is a crucial element in assessing project performance and forecasting future project costs and schedule.
• Compliance Requirement: For many government contracts, particularly those utilizing EVM, accurate BCWP reporting is a contractual obligation.

Practical Examples

1. Software Development Project: A contractor is developing a software module with a budget of $100,000 and a planned completion date of 6 months. After 3 months, the contractor has completed 50% of the planned work. The BCWP at this point would be $50,000 (50% of $100,000).
2. Construction Project: A construction company is building a facility with a budget of $5 million. After one year, the project has completed foundational work budgeted at $1 million, framing work budgeted at $1.5 million, and roofing work budgeted at $500,000. The BCWP would be $3 million.
3. Engineering Services Contract: An engineering firm is providing design services for a government facility. The contract has a total budget of $500,000. At the end of the first quarter, the firm has completed design reviews budgeted at $100,000, preliminary designs budgeted at $75,000 and 50% of the final design budgeted for $150,000. The BCWP would be $100,000 + $75,000 + ($150,000 * 0.5) = $250,000.