Forecast to Complete: Why Budget Minus Spent Is Not a Forecast

Ask a contractor what the rest of a job will cost and you will usually get the budget minus what has been spent. It takes two seconds and it is almost always wrong.

Budget minus spent is a subtraction. It assumes the remaining work will behave exactly as planned, even though the completed work did not. If groundworks ran fifteen per cent over, the odds that the rest runs exactly to budget are poor — and nothing in that subtraction accounts for it.

What an honest forecast looks like

An honest forecast to complete is built package by package. For each package you pick one of three positions, and you are not allowed a fourth.

Complete

Final cost known. Nothing more to add. Say so and stop thinking about it. A surprising number of forecasts carry contingency against packages that finished months ago.

In progress

Forecast the remainder on the evidence of the part already done.

If a package is 60 per cent complete and has consumed 70 per cent of its budget, the honest forecast for the remainder is not the 30 per cent left in the budget. It is the rate you have actually been achieving, applied to the work that remains.

Take a package budgeted at 200,000. It is 60 per cent built and has cost 140,000. Your achieved rate is 140,000 divided by 0.60, which is 233,000 for the full package. The remaining 40 per cent therefore forecasts at 93,000 — not the 60,000 sitting in the budget.

You may depart from the achieved rate, but only if you can name a specific reason. We will catch up is not a reason. The scaffold comes down next week and that was the constraint is a reason. Write the reason down, because next month you will want to know whether it happened.

Not started

Budget stands — unless you already have a quote. If you have a quote, use the quote. It is better information than your budget, whichever direction it points.

Adding it up

Add the three together and you have forecast cost to complete. Add that to incurred cost and you have forecast final cost. Set it against forecast final value and you have the number the whole exercise exists to produce: the margin this job will actually deliver.

Not the margin you tendered. Not the margin you are reporting. The one that will land.

Why people avoid it

Because it is the number that makes the problem real.

Budget minus spent can be produced by anyone in a minute and never forces a conversation. A package-by-package forecast takes an hour and forces someone to say out loud that drainage is going to finish 40,000 over. That conversation is unpleasant in month four and catastrophic in month eleven, which is precisely the argument for having it in month four.

Keep the series

Record the forecast every month and keep every reading.

The trend across months tells you more than any single figure, and it is very hard to argue with. A forecast final margin that has moved 11.8, 11.2, 10.4, 9.5 over four months is not noise. Nobody can look at that line and claim the job is fine.

It also exposes the opposite failure: the forecast that never moves. A cost to complete that reads exactly the same for five months running is not a stable job. It is a number nobody is recalculating.

The point

The forecast is the most valuable number in cost control and the one most often faked, because faking it is easy and nobody checks until the final account.

Build it from the packages, write down your reasons, and keep the series. An hour a month buys you the only early warning the job will ever give you.