What is cost certainty?
Cost certainty is the degree of confidence that a project, or part of a project, can be completed within the agreed budget before work begins.
There can be many factors influencing the certainty of the costs, however today we’ll look at cost uncertainty from the contractor’s side that happens more often than not due to:
- Poor management.
- The inability to predict and control the time needed to complete a project.
- Inaccurate material estimating.
- Poor productivity.
- Inadequate planning.
- Poor site management.
The client’s Quantity Surveyor can add value by monitoring contractor behaviour in the following way:
Key Performance Indicators (KPIs): Put quantifiable metrics in place to see how closely the project is tracking along from the original budget or program. Establish clear metrics for cost, schedule, and quality. Review these benchmarks regularly.
Earned Value Management (EVM): Track the mathematical relationship between the work that was planned, the actual work that was done, and the costs that was spent at a certain point, to objectively identify deviations in contractor productivity.
Transparent Valuation Processes: Conduct fair, detailed, and timely assessments of payment applications. Promptly address discrepancies to maintain the trust with the client as well as the contractor and keep the cash flow predictable.
Variation Management: It is extremely important for a Quantity Surveyor (QS) to enforce a strict change-order protocol to prevent scope creep. Require detailed cost breakdowns for any variations before work proceeds.
Risk and Claims Management: Proactively identify project risks and address potential contractor claims early so that you don’t surprise the client with unforeseen costs when it’s too late.
Regular Site Audits: Perform consistent site walkthroughs and audits to verify the quality of work and ensure compliance with project specifications.
Achieving cost certainty is a meticulous task that cannot be overlooked or neglected, and each stakeholder is accountable to assist in this task, however the Quantity Surveyor is the head of managing this.
Comment on other ways that Cost Certainty can be achieved in a building project.
