Running Monthly Cost Control on a FIDIC Contract

Search for anything about FIDIC and you get entitlement, extension of time, dispute boards and arbitration. The material is written by law firms, claims consultancies and training providers, and it is good material — but it almost all addresses the same moment: after the problem has happened and the argument has started.

There is very little about the other half. How you run the monthly commercial routine on a FIDIC job so that the problem surfaces as a cost variance in month four rather than as a claim in month eleven.

That gap is not an accident. Prevention does not bill hours. But it is where the money is, because a variance caught early is a management decision and the same variance caught late is a negotiation you enter from behind.

What makes FIDIC cost control different

The arithmetic of cost control is the same everywhere. The general discipline does not change because the contract has a different cover. Four things do change, and each puts a hard deadline on a number you would otherwise look at whenever convenient.

There is a clock on bad news

A contractor who wants time or money has 28 days from awareness to notify. That turns cost analysis into a timed exercise: a variance that signals an event is not just information, it is a countdown. Three judgments between 2014 and 2026 have made that bar progressively harder, not softer.

The measure of recovery is fixed by the clause you cite

FIDIC distinguishes Cost, which expressly excludes profit, from Cost Plus Profit. Which one you get depends on the clause, and you are held to the clause you named in the notice. So part of the monthly routine is knowing, before you need it, which entitlement each scenario carries.

Valuation is rule-bound, not negotiable

A quantity swing does not earn a new rate because it feels unfair. Four cumulative tests decide it, and one of them depends on evidence you can only capture while the work is happening.

The cash clock is long and starts on your submission date

Payment falls due 56 days after the Engineer receives your Statement, with certification due inside the first 28 of those. The practical effect is around three months of site spend funded by you at any moment, and a final account tail that can run close to two years past the last of the work.

The monthly routine

Sixty to ninety minutes per contract, same order every month. The order matters because each step feeds the next.

1. Cut everything off on the same date

Value earned, cost incurred, committed cost outstanding — one cut-off, applied to all three. Mixed cut-offs are the single most common reason a reconciliation produces a comfortable answer that turns out to be wrong.

Cost here means cost consumed, not invoices received. Subcontractor work executed rather than billed. Materials delivered including what is stacked unfixed. Plant accrued including standing time.

2. Reconcile cost against value

Margin to date, and the committed position alongside it. Two numbers that tell different stories: a margin holding while the committed position deteriorates means you are buying the remaining work above budget and it has not reached the ledger yet. The method is here.

3. Test committed cost against progress, package by package

The earliest signal available. A package that has committed 85 per cent of its budget at 70 per cent progress is in trouble now, whatever the cost ledger says, because the money is already promised. Why that signal fires first.

4. Forecast to complete, built not subtracted

Package by package, on the rate you have actually achieved — not budget minus spent. The full method. Keep every monthly reading, because the trend is what nobody can argue with.

5. The notice sweep

This is the FIDIC-specific step, and it is the one that does not exist in a domestic cost routine. For every package that moved adversely in steps 2 to 4, two questions:

• Is there an event behind this — something outside our control or our risk?
• If so, has it been notified, and when did we first become aware?

Most months the answer is no event, and the sweep takes four minutes. The month it matters, those four minutes are worth more than the rest of the routine combined.

6. Write down the decisions

With an owner and a date, and carry last month’s list into next month’s meeting. A report that ends without decisions has bought nothing.

Why the sequence is in that order

Because the notice sweep has to come after the analysis and before the month closes.

Put it first and you are guessing which packages are in trouble. Leave it out and you will reach it eventually — at the point where someone asks whether the overrun on a package is recoverable, by which time the 28 days from awareness expired several months ago and the honest answer is that it was recoverable and now is not.

The sequence exists so that the commercial analysis produces the legal action automatically, rather than depending on somebody remembering.

What this does not fix

None of it improves a job that was mispriced or is badly built. Cost control does not add margin.

What it does is convert surprises into decisions. A job going wrong will go wrong either way; the difference is whether you find out while two thirds of the scope is still ahead of you and your notices are in, or at the final account with the work built, the crew gone and the clock run down.

The point

The published FIDIC literature will tell you how to win an argument. It is largely silent on how to avoid needing one, which is the cheaper discipline by a wide margin and consists of an hour a month in a fixed order.

References are to the FIDIC 1999 and 2017 suites as noted in the linked articles. Any real contract’s particular conditions govern. Practical guidance for commercial teams, not legal advice.