What Is Actual Cost (AC/ACWP)? Earned Value Definition

<div class="ge-article-wrapper"><nav class="ge-toc" aria-label="Table of contents"><p class="ge-toc-label">In this article</p><ul class="ge-toc-list"><li><a href="#the-definition">The Definition</a></li><li><a href="#ac-vs-ev-vs-pv-on-a-timeline">AC vs EV vs PV on a Timeline</a></li><li><a href="#what-goes-into-ac">What Goes Into AC</a></li><li><a href="#the-cut-off-date-trap">The Cut-Off Date Trap</a></li><li><a href="#ac-on-nec4-option-c-defined-cost">AC on NEC4 Option C: Defined Cost</a></li><li><a href="#worked-example-cleaning-up-ac-on-a-12m-project">Worked Example: Cleaning Up AC on a £12M Project</a></li><li><a href="#common-mistakes">Common Mistakes</a></li><li><a href="#frequently-asked-questions">Frequently Asked Questions</a></li></ul></nav><article class="ge-article-body"><p>Actual Cost (AC) is the total amount you've actually spent to deliver the work measured in <a href="/en/earned-value/definitions/earned-value">Earned Value</a>. That's it. Labour, plant, materials, subcontractors, every pound that left the project bank account for work that's been physically measured. The older term is ACWP (Actual Cost of Work Performed), still used on plenty of UK projects, especially those with US partners or DOD legacy frameworks.</p><p>Sounds simple. It isn't. AC is the metric that causes more <a href="/en/earned-value">earned value management</a> errors than <a href="/en/earned-value/definitions/planned-value">PV</a> and <a href="/en/earned-value/definitions/earned-value">EV</a> combined, and it's almost always because of the cut-off date trap.</p><p>AC is part of the <a href="/en/earned-value/definitions">earned value definitions glossary</a>. For how it feeds into <a href="/en/earned-value/definitions/cost-performance-index">CPI</a>, <a href="/en/earned-value/cost-schedule-variance">CV</a>, and <a href="/en/earned-value/definitions/estimate-at-completion">EAC</a>, see the <a href="/en/earned-value/formulas">earned value formulas page</a>.</p><h2 id="the-definition">The Definition</h2><div class="ge-formula-box ge-anim"><span class="ge-formula-label">Formula</span><code>AC = cumulative actual cost of work performed to date</code></div><p>No formula. No calculation. Just add up what you've spent on the work that's been counted in EV. The key phrase is \"work performed\", AC should only include costs for work that's been physically measured and recorded in the EV assessment. Break that rule and your <a href="/en/earned-value/definitions/cost-performance-index">CPI</a> becomes noise.</p><p>On NEC4 Option C contracts, AC maps to Defined Cost, the actual cost of providing the works as defined in the contract data, excluding Disallowed Cost.</p><h2 id="ac-vs-ev-vs-pv-on-a-timeline">AC vs EV vs PV on a Timeline</h2><p>The relationship between the three core metrics is best understood visually. Here's what a typical month 6 snapshot looks like on a project that's slightly behind programme and over budget:</p><pre class="ge-ascii-diagram ge-anim"> £ (cumulative) │ │ PV (what you planned to spend) │ ╱ │ ╱╱ │ ╱╱ AC (what you actually spent) │ ╱╱ ╱ │ ╱╱ ╱╱╱ │ ╱╱ ╱╱╱ │ ╱╱ ╱╱╱ EV (value of work done) │ ╱╱ ╱╱╱ ╱ │ ╱╱ ╱╱╱ ╱╱╱ │ ╱╱╱╱╱╱ ╱╱╱ │ ╱╱╱╱╱ ╱╱╱ │ ╱╱╱╱ ╱╱╱ │ ╱╱╱ ╱╱╱ │ ╱╱ ╱╱╱ ├───────────────────────────────────────── Time M1 M2 M3 M4 M5 M6 At month 6: ┌──────────────────────────────────────┐ │ PV = £5.8M (planned spend) │ │ AC = £5.4M (actual spend) ─┐ │ │ EV = £4.9M (value earned) │ │ │ │ │ │ CV = EV - AC = -£500K (over) ←┘ │ │ SV = EV - PV = -£900K (late) │ │ CPI = 4.9/5.4 = 0.91 │ │ SPI = 4.9/5.8 = 0.84 │ └──────────────────────────────────────┘ AC above EV = cost overrun EV below PV = schedule delay </pre><p>When AC is above EV, you're spending more than you're earning. That's a cost overrun. When EV is below PV, you're behind programme. Both can happen simultaneously, and on the projects I've worked on, they usually do.</p><h2 id="what-goes-into-ac">What Goes Into AC</h2><p>On a UK construction project, AC typically includes five cost categories:</p><div class="ge-table-wrap ge-anim"><table class="ge-table"><thead><tr><th>Cost Category</th><th>Example</th><th>Monthly AC Contribution (£12M project)</th></tr></thead><tbody><tr><td>Labour</td><td>Directly employed trades and staff</td><td>£180,000 - £320,000</td></tr><tr><td>Plant</td><td>Hired and owned plant on measured work</td><td>£90,000 - £250,000</td></tr><tr><td>Materials</td><td>Installed materials only (not stockpiled)</td><td>£200,000 - £600,000</td></tr><tr><td>Subcontractors</td><td>Valued work by specialist subs</td><td>£300,000 - £800,000</td></tr><tr><td>Prelims (site overheads)</td><td>Apportioned to measured work period</td><td>£80,000 - £150,000</td></tr></tbody></table></div><p>Notice that word \"installed.\" Materials delivered to site but sitting in a compound aren't in EV, so they shouldn't be in AC either. I've seen this one mistake, including stockpiled materials in AC, knock a CPI from 0.97 to 0.88 on a £25M civils job. The commercial director thought they had a genuine cost problem. They didn't. They had a data quality problem.</p><h2 id="the-cut-off-date-trap">The Cut-Off Date Trap</h2><p>This is the single most common AC error in UK construction EVM. It deserves its own section.</p><p>Your cost report runs to the 25th of each month. Your progress assessment happens on the last day of the month. That's five days of mismatch. Five days of labour, plant, and materials that are in AC but not in EV. On a project burning £40K per day, that's £200K of AC with no corresponding EV.</p><p>The result? Artificially low CPI. Every month.</p><pre class="ge-ascii-diagram ge-anim"> THE CUT-OFF DATE TRAP ──────────── Month 6 ─────────────── │ │ │ Cost report period │ │ 1st ─────────────────── 25th │ │ │ │ │ │ GAP │ │ │ (5 days) │ │ │ │ │ Progress assessment period │ │ 1st ────────────────────── 30th │ │ │ ──────────────────────────────────── 5 days × £40K/day = £200K in AC with no EV CPI with aligned dates: EV £4.9M / AC £5.2M = 0.942 CPI with mismatched dates: EV £4.9M / AC £5.4M = 0.907 Difference: 0.035 → forecasts £420K more overrun than reality </pre><p>The fix is dead simple. Align your cut-off dates. Same day for cost collection, progress measurement, and EV calculation. Every month. No exceptions. I've had QSs tell me \"the accounts team can't do it.\" They can. They just need to be asked properly, which usually means showing them a graph of how misaligned dates corrupt the forecast their finance director relies on.</p><h2 id="ac-on-nec4-option-c-defined-cost">AC on NEC4 Option C: Defined Cost</h2><p>On NEC4 Option C, the contract already defines what counts as actual cost. It's called Defined Cost, and it includes:</p><ul><li>People directly employed in providing the works (the people cost)</li><li>Equipment and plant</li><li>Subcontract costs for work actually done</li><li>Other costs defined in the Schedule of Cost Components</li></ul><p>Plus the fee percentage applied to Defined Cost.</p><p>Disallowed Cost under clause 11.2(26) is excluded, cost that the Project Manager determines wasn't incurred properly. This maps neatly to EVM: Disallowed Cost isn't legitimate project expenditure, so it shouldn't appear in AC.</p><p>The pain/gain mechanism at project end compares total Defined Cost against the target (<a href="/en/earned-value/definitions/budget-at-completion">BAC</a>). If your AC tracking in EVM matches Defined Cost tracking in the contract administration, you've got a single source of truth. If they diverge, you're maintaining two parallel cost systems and wondering why they tell different stories.</p><h2 id="worked-example-cleaning-up-ac-on-a-12m-project">Worked Example: Cleaning Up AC on a £12M Project</h2><span class="ge-worked-label">Worked Example</span><div class="ge-callout ge-anim"><p><strong>Scenario:</strong> Amey is delivering a £12M NEC4 Option C road maintenance scheme in Lancashire. At the month 7 assessment (cut-off: 28 February 2026), the cost report shows total spend of £5,340,000.</p><p>The commercial manager reviews the data and flags three issues:</p><p><strong>Issue 1: Stockpiled materials</strong> £145,000 of kerbing and drainage materials delivered to site but not yet installed. Counted in the cost report because the invoices are paid. But nothing's in the ground, so there's no corresponding EV.</p><p><strong>Issue 2: Subcontractor overbilling</strong> One subcontractor's interim application includes £72,000 for traffic management in the first week of March. The work hasn't happened yet. The application was processed early because the sub's commercial manager was going on holiday. Genuinely.</p><p><strong>Issue 3: Prelims timing</strong> £38,000 of February prelims relate to the period 1st to 28th Feb. But the progress assessment measured work to 21st Feb (the Friday before the end of the month). Seven days of prelims are in AC but the corresponding progress isn't in EV.</p><p><strong>Correction:</strong></p><div class="ge-table-wrap ge-anim"><table class="ge-table"><thead><tr><th>Item</th><th>Adjustment</th></tr></thead><tbody><tr><td>Raw AC from cost report</td><td>£5,340,000</td></tr><tr><td>Less: stockpiled materials</td><td>-£145,000</td></tr><tr><td>Less: March TM overbilling</td><td>-£72,000</td></tr><tr><td>Less: 7 days excess prelims</td><td>-£9,500</td></tr><tr><td><strong>Adjusted AC for EVM</strong></td><td><strong>£5,113,500</strong></td></tr></tbody></table></div><p><strong>Impact on CPI:</strong></p><p>EV at month 7 = £4,850,000</p><ul><li>CPI with raw AC: £4,850,000 / £5,340,000 = <strong>0.908</strong></li><li>CPI with adjusted AC: £4,850,000 / £5,113,500 = <strong>0.948</strong></li></ul><p>That's the difference between \"we need a formal cost recovery plan\" and \"we've got a manageable variance to monitor.\" Same project. Same work. Better data.</p></div><h2 id="common-mistakes">Common Mistakes</h2><ol><li><strong>Including costs for unmeasured work.</strong> Materials on site, advance payments to subs, mobilisation costs for future phases. None of these belong in AC if the work isn't in EV. Including them makes CPI artificially low and triggers false alarms.</li><li><strong>Mismatched cut-off dates.</strong> Covered above, but it bears repeating. If your cost report and progress assessment don't share the same cut-off date, your CPI is fiction. Align them. Today.</li><li><strong>Confusing AC with cash flow.</strong> AC is cost incurred for measured work. Cash paid is what's left the bank account. Cash received is what the client's paid you. Three different numbers. Confusing them is like comparing your fuel consumption with your petrol station receipts, related, but not the same thing.</li><li><strong>Double-counting subcontractor costs.</strong> If you accrue estimated subcontract costs and then also include the actual invoice when it arrives, you've got the same work counted twice in AC. Pick one: accruals-based or invoice-based. Stick with it.</li><li><strong>Forgetting Disallowed Cost adjustments.</strong> On NEC4, if the PM disallows a cost, it's out of Defined Cost and should come out of AC. If it stays in, your CPI reflects expenditure that the contract doesn't recognise.</li></ol><div class="ge-product-note ge-anim"><p><strong>How Gather helps.</strong> Gather's AI reads your site diaries daily and maps progress against your cost-loaded programme, giving you accurate earned value data without manual spreadsheet updates. <a href="https://gatherinsights.com/contact">Book a demo</a> to see it working on a live NEC4 project.</p></div><h2 id="frequently-asked-questions">Frequently Asked Questions</h2><h3>Is ACWP different from AC?</h3><p>No. ACWP (Actual Cost of Work Performed) is the original US Department of Defense term from the C/SCSC framework. AC (Actual Cost) is the modern PMI and ISO 21508 standard term. Same definition. You'll see both in UK practice, ACWP tends to appear in older textbooks and on projects influenced by US methodology. Use whichever your project team recognises.</p><h3>Does AC include overheads?</h3><p>It depends on your EVM cost model. Most UK construction implementations include site overheads (preliminaries) because they're directly incurred on the project. Head office overheads are typically excluded unless they're part of the contract cost structure, as they are on NEC4 via the fee percentage applied to Defined Cost.</p><h3>What happens if AC is lower than EV?</h3><p>Your CPI is above 1.0, which means you're delivering work for less than budgeted. That's a cost underrun. Sounds great, and sometimes it is. But check why before celebrating. Common reasons: work measured ahead of costs being captured (timing issue, not real efficiency), or scope delivered at lower quality than specified (which will cost more later to fix).</p><h3>How often should AC be updated?</h3><p>Monthly, aligned with the progress assessment cycle. Some larger programmes update fortnightly, but monthly is the standard for UK construction EVM. The key isn't frequency. It's consistency. AC, EV, and PV must all use the same reporting period. Every time. Without exception.</p></article></div>