Glossary of Technical Terms Used in Project Planning & Scheduling: Budgeted Cost of Work Performed ("BCWP")

Budgeted Cost of Work Performed ("BCWP")

Understanding Budgeted Cost of Work Performed (BCWP): A Key Metric in Cost Estimation and Control

In the realm of project management, accurate cost estimation and control are crucial for success. One of the key metrics used to track progress and identify potential cost overruns is the Budgeted Cost of Work Performed (BCWP).

What is BCWP?

BCWP represents the value of work completed based on the project's budget. It's the sum of the approved cost estimates, including any overhead allocations, for activities or portions of activities completed during a specific period, usually from the project's start date to the current point.

Understanding the Concept:

Imagine a project with a total budget of $100,000. Let's say that 60% of the planned work is completed by a certain date. In this scenario, the BCWP would be $60,000 (60% of $100,000). This figure reflects the portion of the project budget that has been "earned" based on the completed work, regardless of the actual cost incurred.

The Importance of BCWP:

BCWP plays a critical role in project cost control and performance measurement. It allows project managers to:

  • Track progress and identify variances: Comparing the BCWP with the actual cost incurred (ACWP) helps identify cost overruns or savings.
  • Assess project performance: BCWP, along with other metrics like Earned Value (EV) and Actual Cost (AC), are used to calculate the Cost Performance Index (CPI), a crucial indicator of project cost efficiency.
  • Make informed decisions: Understanding the BCWP enables project managers to make informed decisions regarding resource allocation, budget adjustments, and potential risk mitigation.

How to Calculate BCWP:

BCWP is calculated by multiplying the percentage of work completed by the budgeted cost of that work. The percentage of work completed can be determined using various methods, including:

  • Physical percent complete: Based on the amount of work physically completed, like the number of units produced.
  • Milestone-based percent complete: Based on the completion of specific project milestones.
  • Expert opinion: Based on the judgment of experienced project team members.

Example:

Consider a project with a budget of $50,000. The project involves building 100 units. After a month, 40 units are completed. The BCWP would be calculated as:

  • Percentage of work completed: 40 units / 100 units = 40%
  • BCWP: 40% * $50,000 = $20,000

Conclusion:

BCWP is a powerful tool for project cost estimation and control. By tracking the value of work completed against the budget, project managers gain valuable insights into project performance and can make informed decisions to ensure cost-effective and successful project delivery. Its importance lies in its ability to provide a clear picture of how much of the project budget has been "earned" for the work completed, enabling effective cost control and performance monitoring.


Test Your Knowledge

BCWP Quiz

Instructions: Choose the best answer for each question.

1. What does BCWP stand for?

a) Budgeted Cost of Work Performed b) Budget Control for Work Progress c) Budget Cost of Work Progress d) Budgeted Cost for Work Performed

Answer

a) Budgeted Cost of Work Performed

2. BCWP represents:

a) The total project budget b) The actual cost incurred to date c) The value of work completed based on the project budget d) The remaining budget for the project

Answer

c) The value of work completed based on the project budget

3. Which of the following is NOT a method to determine the percentage of work completed for BCWP calculation?

a) Physical percent complete b) Milestone-based percent complete c) Expert opinion d) Cost Performance Index

Answer

d) Cost Performance Index

4. A project has a budget of $100,000. 40% of the work is completed. What is the BCWP?

a) $40,000 b) $60,000 c) $100,000 d) Cannot be determined without more information

Answer

a) $40,000

5. BCWP is a crucial metric for:

a) Tracking project progress and identifying variances b) Assessing project performance c) Making informed decisions regarding resources and budget d) All of the above

Answer

d) All of the above

BCWP Exercise

Scenario:

You are managing a project to build a new software application. The total project budget is $80,000. The project is divided into four phases:

  • Phase 1: Design - Budget: $20,000
  • Phase 2: Development - Budget: $30,000
  • Phase 3: Testing - Budget: $15,000
  • Phase 4: Deployment - Budget: $15,000

Currently, the project is in Phase 2, and 60% of the development work is completed.

Task:

Calculate the BCWP for the project as of today.

Exercice Correction

Here's how to calculate the BCWP:

**1. Work completed in Phase 1:** 100% (Phase 1 is completed)

**2. Work completed in Phase 2:** 60%

**3. Work completed in Phase 3 & 4:** 0% (Not yet started)

**BCWP Calculation:**

Phase 1: 100% * $20,000 = $20,000

Phase 2: 60% * $30,000 = $18,000

Phase 3 & 4: 0% * ($15,000 + $15,000) = $0

**Total BCWP:** $20,000 + $18,000 + $0 = $38,000

Therefore, the BCWP for the project as of today is $38,000.


Books

  • A Guide to the Project Management Body of Knowledge (PMBOK® Guide) (Project Management Institute) - Chapters on Cost Management and Earned Value Management provide extensive information on BCWP and its role in project cost control.
  • Project Management for Dummies by Stanley E. Portny, Joseph Phillips - Explains fundamental project management concepts, including Earned Value Management, making it a good starting point for understanding BCWP.
  • Effective Project Management by Tim Lister, Judith Bishop, and John Manydlik - Offers comprehensive coverage of project management best practices, including cost management and EVM.
  • Earned Value Management: A Comprehensive Guide by David L. Yates - This book is dedicated entirely to Earned Value Management, providing in-depth explanations of BCWP, other EVM metrics, and their practical applications.

Articles

  • "Earned Value Management: A Practical Guide for Project Managers" by ProjectManagement.com - A well-written article summarizing EVM principles and the importance of BCWP.
  • "Understanding the Cost Performance Index" by PMI - Provides a clear explanation of the Cost Performance Index (CPI) and its relationship to BCWP and ACWP.
  • "The Importance of Budgeted Cost of Work Performed (BCWP) in Project Management" by BusinessBalls - A concise article outlining the significance of BCWP and its application in project cost control.

Online Resources

  • Project Management Institute (PMI) - The official website of PMI offers numerous resources on EVM, including articles, webinars, and certification courses.
  • Earned Value Management (EVM) – Practical Guide by MindTools - Provides a step-by-step guide to understanding and implementing EVM.
  • "Earned Value Management (EVM)" by PM Hut - A comprehensive online resource covering EVM concepts, calculations, and practical applications.

Search Tips

  • Use specific keywords like "Budgeted Cost of Work Performed," "BCWP," "Earned Value Management," "EVM," and "Cost Control" in your searches.
  • Combine keywords with specific applications, such as "BCWP in software development," "BCWP in construction," or "BCWP in government projects."
  • Use quotation marks around specific phrases to find exact matches, e.g. "Budgeted Cost of Work Performed".
  • Include relevant terms like "project management" or "cost management" to narrow down your results.
  • Explore different file types by using "filetype:pdf" or "filetype:ppt" to find documents or presentations.
Similar Terms
Oil & Gas Processing
Cost Estimation & Control
Project Planning & Scheduling
Budgeting & Financial Control
Oil & Gas Specific Terms
Pipeline Construction
General Technical Terms
Most Viewed

Comments


No Comments
POST COMMENT
captcha
Back