How do you forecast the final cost each month?

The monthly build-up

• Cost to date, from the ledger.
• Committed cost, from orders and subcontracts not yet paid.
• Cost to complete, for work not yet ordered.
• Approved changes, in cost and in income.
• Pending changes, shown as a separate line.
• Risk allowance, taken from contingency.

Checklist each month

• Take cost to date from the ledger and committed cost from orders.
• Ask the site team what the work left will cost.
• Add approved changes, and list pending ones on a separate line.
• Explain every movement since last month.
• Show a best, middle and worst case.
• Date the version and keep the old ones.

A forecast that never changes is a sign that nobody looked. Site staff often know of costs that the ledger has not seen yet.

Keep the pending changes visible so the owner sees what is not yet agreed. Over time, the old versions show how well the team predicts cost.

Use the same layout every month: cost to date, committed, cost to complete, changes and risk. A reader can then compare months line by line.

A worked example

Say a road job has a budget of 2,000 units. At month four, 900 is spent and 500 is committed in orders. The site team puts the work left at 650.

That gives a forecast of 2,050, which is 50 over budget. Last month it was 1,980. The report explains the 70: the crew hit more rock than expected.

Two pending changes add 60 of cost that the client has not yet agreed to pay. They sit on their own line, so the owner can see the gap. The best case has both changes agreed. The worst case has neither agreed, plus a draw on contingency for more rock.

Related answers

• How do I see project changes before they become costs?
• How do I keep the final cost close to the contract price?
• How do I know what my contractor has been told to change?
• What should a weekly change report show a project owner?