Variance at Completion (VAC) Formula in EVM Explained

<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-formula">The Formula</a></li><li><a href="#how-vac-relates-to-the-budget-picture">How VAC Relates to the Budget Picture</a></li><li><a href="#worked-example-vac-on-a-mixed-use-development">Worked Example: VAC on a Mixed-Use Development</a></li><li><a href="#why-vac-matters-in-construction">Why VAC Matters in Construction</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>Variance at Completion (VAC) tells you how much over or under budget your project is forecast to be when all the work is done. That's it. One number, one question answered: will we finish with money left or a hole in the budget? If your <a href="/en/earned-value/definitions/budget-at-completion">BAC</a> is £12M and your <a href="/en/earned-value/definitions/estimate-at-completion">EAC</a> is £13.2M, your VAC is -£1.2M. You're heading for a £1.2M overrun. No ambiguity.</p><p>VAC is part of the <a href="/en/earned-value/definitions">earned value definitions glossary</a>. For the full set of forecasting formulas, see the <a href="/en/earned-value/eac-etc-tcpi">EAC, ETC, and TCPI page</a>.</p><h2 id="the-formula">The Formula</h2><div class="ge-formula-box ge-anim"><span class="ge-formula-label">Formula</span><code>VAC = BAC - EAC</code></div><p>That's genuinely it. Possibly the simplest formula in all of <a href="/en/earned-value">earned value management</a>. But simplicity doesn't mean it's unimportant.</p><div class="ge-table-wrap ge-anim"><table class="ge-table"><thead><tr><th>VAC Result</th><th>Meaning</th></tr></thead><tbody><tr><td>VAC > 0</td><td>Forecast to finish <strong>under</strong> budget</td></tr><tr><td>VAC = 0</td><td>Forecast to finish <strong>on</strong> budget</td></tr><tr><td>VAC < 0</td><td>Forecast to finish <strong>over</strong> budget</td></tr></tbody></table></div><p>You can also express it as a percentage:</p><p><strong>VAC% = (VAC / BAC) x 100</strong></p><p>A VAC% of -10% means you're forecasting a 10% budget overrun. On a £12M contract, that's £1.2M the project team needs to find, or explain.</p><h2 id="how-vac-relates-to-the-budget-picture">How VAC Relates to the Budget Picture</h2><pre class="ge-ascii-diagram ge-anim">VARIANCE AT COMPLETION – Visual ============================================= Budget at Completion (BAC): £12,000,000 |============================================| Estimate at Completion (EAC): £13,200,000 |============================================|========| |&lt;-VAC-&gt;| -£1.2M BAC £12.0M |########################| | | EAC £13.2M |########################|///////| | | | | Planned Budget |Overrun| | | | VAC = BAC - EAC = £12.0M - £13.2M = -£1.2M VAC% = -£1.2M / £12.0M = -10.0% INTERPRETATION: The project will cost £1.2M more than the approved budget – a 10% overrun.</pre><h2 id="worked-example-vac-on-a-mixed-use-development">Worked Example: VAC on a Mixed-Use Development</h2><span class="ge-worked-label">Worked Example</span><div class="ge-callout ge-anim"><p><strong>Scenario:</strong> A £30M NEC4 Option C mixed-use development in Manchester. The project is at month 10 of an 18-month programme. The commercial manager runs the EVM numbers at the March 2026 cut-off.</p><p><strong>Project-level data:</strong></p><div class="ge-table-wrap ge-anim"><table class="ge-table"><thead><tr><th>Metric</th><th>Value</th></tr></thead><tbody><tr><td>BAC (original target + implemented CEs)</td><td>£31,400,000</td></tr><tr><td><a href="/en/earned-value/definitions/earned-value">EV</a> (cumulative)</td><td>£17,600,000</td></tr><tr><td><a href="/en/earned-value/definitions/actual-cost">AC</a> (cumulative)</td><td>£18,900,000</td></tr><tr><td><a href="/en/earned-value/definitions/cost-performance-index">CPI</a></td><td>0.931</td></tr></tbody></table></div><p><strong>Calculating EAC (using cumulative CPI method):</strong></p><p>EAC = BAC / CPI = £31,400,000 / 0.931 = <strong>£33,726,100</strong></p><p><strong>Calculating VAC:</strong></p><p>VAC = BAC - EAC = £31,400,000 - £33,726,100 = <strong>-£2,326,100</strong></p><p>VAC% = -£2,326,100 / £31,400,000 = <strong>-7.4%</strong></p><p><strong>What this means in practice:</strong></p><p>On an NEC4 Option C contract, this £2.33M overrun falls within the pain/gain mechanism. If the share range is 50/50 up to 110% of target, the Contractor's exposure is roughly half the overrun: about £1.16M out of the Contractor's margin. That's the difference between a profitable job and a loss.</p><p>The commercial manager presents two scenarios to the project director:</p><div class="ge-table-wrap ge-anim"><table class="ge-table"><thead><tr><th>Scenario</th><th>Assumed CPI for Remaining Work</th><th>EAC</th><th>VAC</th><th>Contractor's Share</th></tr></thead><tbody><tr><td>Continue at current CPI (0.931)</td><td>0.931</td><td>£33,726,100</td><td>-£2,326,100</td><td>~£1,163,000</td></tr><tr><td>Improve to CPI 0.97 for remaining work</td><td>0.97</td><td>£32,623,000</td><td>-£1,223,000</td><td>~£611,500</td></tr><tr><td>Hit budget exactly for remaining work</td><td>1.00</td><td>£32,100,000</td><td>-£700,000</td><td>~£350,000</td></tr></tbody></table></div><p>The improvement needed to break even on VAC: a CPI of 1.096 for the remaining £13.8M of work. Achievable? Unlikely. The realistic target is damage limitation.</p></div><h2 id="why-vac-matters-in-construction">Why VAC Matters in Construction</h2><p>VAC is the metric that connects earned value to commercial reality. <a href="/en/earned-value/definitions/cost-performance-index">CPI</a> tells you efficiency. <a href="/en/earned-value/definitions/schedule-performance-index">SPI</a> tells you pace. VAC tells you money. Specifically, how much money you're going to be short at the end.</p><p>On NEC4 Option C contracts, VAC feeds directly into the pain/gain calculation. On JCT lump sum contracts, VAC shows how much of your margin is being eroded. On cost-plus work, VAC tells the client how much more they'll be paying than planned.</p><p>I've sat in project reviews where the team was fixated on monthly CPI improvements, "we went from 0.92 to 0.94 this month!", without understanding that their cumulative VAC was still -£1.8M and getting worse. CPI can improve while VAC deteriorates. It happens when you're spending more efficiently but the damage from early months is already baked in.</p><p>That's why VAC is the metric you put in front of the project director. Not CPI. Not SPI. VAC. Because it answers the question they actually care about: how much is this going to cost us?</p><h2 id="common-mistakes">Common Mistakes</h2><ol><li><strong>Using the wrong EAC.</strong> VAC is only as good as the EAC that feeds it. If your EAC is the optimistic "bottom-up re-estimate that assumes everything goes perfectly from now on," your VAC is fiction. Use CPI-based EAC as the baseline and bottom-up as the comparison. See the <a href="/en/earned-value/eac-etc-tcpi">EAC, ETC, TCPI page</a> for the different methods.</li><li><strong>Not updating BAC for scope changes.</strong> On NEC4 Option C, BAC changes with every implemented compensation event. If BAC is stale, VAC is wrong. I've covered this in detail on the <a href="/en/earned-value/definitions/budget-at-completion">BAC page</a>, it's the single most common error I see in construction EVM.</li><li><strong>Ignoring positive VAC.</strong> A positive VAC (under budget forecast) isn't always good news. It might mean you've under-measured EV, or the scope hasn't been fully accounted for, or <a href="/en/earned-value/definitions/undistributed-budget">undistributed budget</a> is inflating BAC without corresponding work being planned. Investigate positive VAC the same way you'd investigate negative.</li><li><strong>Presenting VAC without context.</strong> VAC of -£500K means very different things on a £5M contract (10% overrun, serious) versus a £100M programme (0.5%, within noise). Always present VAC alongside VAC% and the commercial impact, pain/gain share, margin erosion, or client exposure.</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>What's the difference between VAC and Cost Variance (CV)?</h3><p><a href="/en/earned-value/cost-schedule-variance">Cost variance</a> (CV = EV - AC) tells you how you've performed so far. VAC (BAC - EAC) tells you how you'll perform by the end. CV is a rearview mirror. VAC is a forecast. You can have a negative CV today but a positive VAC if you expect performance to improve, though in my experience, that rarely happens without deliberate corrective action.</p><h3>Can VAC change from month to month?</h3><p>Yes, and it should. As your EAC updates each reporting period, reflecting new information, corrective actions, and actual performance, VAC moves with it. Track VAC trend over time. If it's getting worse each month, your corrective actions aren't working. If it's stabilising, you've at least stopped the bleeding.</p><h3>How does VAC feed into the TCPI calculation?</h3><p><a href="/en/earned-value/definitions/to-complete-performance-index">TCPI</a> tells you the CPI you'd need on remaining work to hit a target budget. If you use BAC as the target, TCPI = (BAC - EV) / (BAC - AC). If VAC shows you can't hit BAC, you might switch the target to EAC: TCPI = (BAC - EV) / (EAC - AC). The second version tells you the efficiency needed to hit your revised forecast rather than the original budget.</p></article></div>