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Cost control

Forecasting cost to complete every month

By Review.LivePublished 3 min readHow we write

The operations manager's email arrives on the last Thursday of the month: forecasts for every job by Monday. On your seniors' residence, the drywall code still shows $138,000 of budget left, and the superintendent says the crew is slower than the estimate. Last month you reported it $22,000 under budget.

Three people's hands over printed house plans with a scale ruler, pencil and calculator on a shared table.
Photo: Pedro Miranda on Unsplash

Budget minus cost to date is not a forecast: it assumes the remaining work will cost exactly what is left, so every code looks on budget until its money runs out. A budget is an allocation; a forecast is a prediction. A code's forecast final cost is its cost to date plus an estimate of what remains, built from the commitments already made and the quantities and rates still ahead.

Building the forecast, code by code

  1. Cut off the costs at month-end, adding invoices received but not yet entered and hours worked but not yet paid.
  2. List the commitments: the balance still to invoice on each subcontract and purchase order.
  3. Price the uncommitted work from remaining quantities at the rate the crew is achieving, not an estimate rate it has never reached.
  4. Add what you know is coming: material still to buy, back charges, extras you expect to absorb. Keep pending changes on their own line, as in your change order log.
  5. Add it up: cost to date plus committed balances plus remaining cost is the forecast final cost. Compare it with the current budget, including approved changes.
  6. Explain the movement since last month: one line per reason, with the amount, for every code that moved more than your threshold.
  7. Walk it through with the superintendent before it goes out.

Common mistakes

  • Reporting budget minus cost to date as the forecast.
  • Pricing the remaining work at an estimate rate the crew has never reached.
  • Leaving out purchase order balances and invoices not yet entered.
  • Holding back a known overrun until a better month.

Checklist

Before you send the forecast

  • Costs cut off at month-end, late invoices accrued
  • The balance of every subcontract and purchase order
  • Remaining quantities measured, not guessed
  • Remaining labour at the rate the crew achieves
  • Pending changes on their own line
  • Forecast final cost against the current budget
  • One line for each movement since last month

Check your understanding

Why is "budget minus cost to date" a poor forecast when the crew is slower than the estimate?

Show the answer
It assumes the rest of the work will cost exactly the budget that is left, so the code looks on budget until the money runs out. Pricing the remaining quantity at the crew's actual rate shows the overrun while there is still work left to change.

Sources

  1. Earned Value Management Gold CardU.S. National Science Foundation · accessed
  2. Recommended Practice 10S-90: Cost Engineering TerminologyAACE International · accessed

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