The Monthly Construction Cost Report: What Goes In It and How to Read It

Most monthly cost reports in construction share three properties: they are long, they are late, and nobody reads past the first page.

The useful version fits on one page, takes under an hour to produce, and ends with decisions rather than observations.

What goes in it

Six blocks. Nothing else earns its place.

1. Value. Earned to date, and earned this month. The value of work genuinely executed, not what you applied for.
2. Cost. Incurred to date, committed and outstanding, and the sum of the two.
3. Margin. To date in money and per cent, the variance in percentage points against the tendered margin, and the direction of travel since last month.
4. Forecast. Cost to complete, forecast final cost, forecast final value, forecast final margin.
5. Cash. Certified and unpaid, retention held, the next payment due, and the depth and month of the forecast trough.
6. Signals and decisions. Which thresholds fired, and what was decided about each.

If a figure in your report has never once changed a decision, delete it. Reports grow by accretion and nobody ever removes anything.

The order to read it in

Order matters, because the first number you look at frames everything after it.

Start with the forecast final margin, not the margin to date. Margin to date is history. The forecast is the only figure that is still actionable, and starting there stops the meeting becoming an argument about last month.

Then the direction of travel. A job at 9 per cent against a 12 per cent budget but improving for three months is in better shape than one at 10 per cent and falling. The level tells you where you are; the direction tells you where you are going, and the direction is the more useful of the two.

Then the cash trough. Margin problems cost money. Cash problems close companies. A profitable contractor with a sixty-day hole and a thirty-day facility has a real emergency, whatever the margin says.

Then the worst package. One package usually drives most of the variance. Find it before you look at anything else.

Three entries, and only three

For every signal that fired, the report must carry one of exactly three entries. A report that ends without them is a reporting exercise, and reporting exercises get cancelled the moment people are busy.

• An action, with an owner and a date.
• A decision to accept, with the reason. Accepting the overrun on drainage, 6,000, ground conditions, not recoverable is a legitimate and useful entry. Writing it down stops the same argument happening again in four weeks.
• The information needed before you can decide, with who is getting it and by when.

Timing

Within five working days of month end. By day ten the numbers are stale and the meeting turns into archaeology.

The fifth working day usually works because most supplier invoices for the previous month have landed by then — though if you are waiting for invoices to tell you your cost position, see the note on committed cost: you should already know most of it.

Carry three numbers forward

End every report with the same three figures, and open the next month’s meeting with them:

• Forecast final margin
• Cash trough — depth and month
• The largest single risk

Putting last month’s three at the top of this month’s page is the cheapest accountability mechanism in construction. It takes thirty seconds and makes it impossible to quietly forget what you said four weeks ago.

The point

A cost report is not a record. It is an instrument for changing what happens next.

If it is produced after the decisions have been taken, or it ends without any, it has cost you an hour a month and bought nothing.