Cost to complete

Cost-to-complete (CTC) is worked out line by line against the cost plan, not as one number at the end. For each cost code, the commercial team looks at:

• Actual cost to date. Invoices paid or accrued and labour already spent.

• Committed but not yet spent. The unspent balance of subcontracts and purchase orders.

• Uncommitted forecast. Work that has not yet been let, priced from estimates or quotes.

• Risks and known changes. Pending variations, contra charges and items the team expects to cost more.

Cost-to-complete is everything still to come. Forecast final cost equals actual cost to date plus cost-to-complete. Compare that with the budget, adjusted for approved variations on the revenue side, and you have the forecast margin.

For a deeper look, read Cost to Complete: The Number That Tells You If You Are Still Making Money.

Most builders run a monthly cost report, and the CTC review is its heart. It is where the project manager and commercial manager agree on what the job will really cost, rather than what the original estimate said.

A good CTC shows problems early. A trade running over budget, a subcontract package that came in higher than the allowance, or preliminaries burning faster because the programme has slipped all show up as a lower forecast margin months before the project finishes. That leaves time to act: chase variations, value engineer remaining packages or tighten site costs.

For the business, project CTCs feed into revenue recognition and cash flow forecasting, so an optimistic CTC on one job can overstate profit across the company.

The CTC review is also a good point to check the programme. If the forecast completion date has moved, time-related costs, such as supervision and crane hire, need to move with it, along with any liquidated damages exposure or extension of time claims that change the picture.

Committed cost is what you have signed up to pay through subcontracts and purchase orders. It is a fact on paper.

Cost-to-complete is a forecast. It includes the uncommitted balance of each package, likely variations and site costs still to be incurred. A project can be fully committed on a trade and still have cost-to-complete above zero, because the subcontractor's variations and back charges have not been settled.

• Using budget minus spend. Remaining budget is not a forecast. If a package was let over budget, CTC must reflect the subcontract value, not the allowance.

• Forgetting time-related costs. If the programme extends, preliminaries such as supervision, site sheds and cranes keep running.

• Holding back bad news. Delaying a cost overrun to next month only makes the fade bigger.

• Ignoring unapproved variations. Forecast the cost of directed work even before it is priced or approved on the revenue side.

No audit trail. Record why each forecast changed month to month, so movements can be explained to the business and the client.