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How do you verify cost report accuracy?

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Cost reports are essential tools for managing construction projects, as they provide information on the actual and forecasted costs, revenues, and profits of the work. However, cost reports are only as reliable as the data and methods used to create them. Therefore, it is important to verify the accuracy of cost reports regularly, and to identify and correct any errors or discrepancies. In this article, we will discuss how to verify cost report accuracy in six steps.

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Stewart Humphreys

Associate at Rider Levett Bucknall
Vijay Venkata Krishna Geddam, MRICS, PMP

Charted Quantity Surveyor| Cost | Claim | Contract
Sunita Panich

Business and Engineering Support at WestGlen Consult

1 Review the cost report format

The first step when preparing a cost report is to review its format and structure, ensuring that it is aligned with the project scope, budget, and schedule. It should include a summary of the project status, highlighting any major changes, issues, or risks; a breakdown of the costs by category; a comparison of the actual costs to the budgeted or estimated costs and variance analysis; a projection of the costs to complete the project; a cash flow statement; and a list of assumptions, exclusions, and qualifications that affect the cost report. To ensure accuracy and clarity, the cost report format should follow industry standards and best practices.

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Gorti Jogarao

General Manager -Cost control & Audit at GBH International Contracting LLC
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Purchase department tracers will be available to cost variance minimum 5 quotes, forward items, negotiation to require, subcontract to the tender

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2 Validate the cost report data

The second step is to validate the data sources and inputs used to generate the cost report, ensuring they are accurate, complete, and up to date. The cost report should come from reliable and verifiable sources, such as the project accounting system, which records the actual costs incurred and the revenues earned; the project management system, which tracks progress and performance of the work; project documents such as contracts, invoices, receipts, change orders, and claims; and the project team, which provides feedback and insights on the project status and issues. Additionally, it is necessary to check for any errors, omissions, duplications, or inconsistencies in the cost report data and reconcile it with the original sources.

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Vijay Venkata Krishna Geddam, MRICS, PMP

Charted Quantity Surveyor| Cost | Claim | Contract
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Reporting the cost involves accurately valuing the actual costs at the time of the cost report and forecasting the cost to be incurred can be reasonably be foreseen with respect to Risk involved in the scope of works and conditions of the contract. Actual cost incurred shall be compared with the Bills, invoices and financial statements. Nevertheless, the cost report should be updated if any adjustments are made based on the variations and claims.

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3 Analyze the cost report results

Analyzing the results and outcomes of the cost report is the third step. The cost report should reflect the actual and expected performance of the project, and provide useful information for decision making and problem solving. Analyze the cost report for any trends, patterns, or anomalies such as variances between actual costs and budgeted/estimated costs, cash flow versus planned/forecasted cash flow, and risks/uncertainties that affect the cost report. Additionally, compare the cost report with previous reports, project baseline, and industry benchmarks, and adjust for any changes or corrections. This will ensure that the results are realistic, reasonable, and relevant.

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4 Communicate the cost report findings

The fourth step is to communicate the findings and implications of the cost report to the relevant stakeholders, and ensure they are kept up-to-date. It is important to be clear, concise, and timely when presenting the cost report findings. This should include a summary of the key points and messages, a presentation of the data and results using visuals, an explanation of the analysis and recommendations, as well as a solicitation of feedback from stakeholders. Appropriate channels and formats should be used for communicating the cost report findings, such as reports, meetings, emails, or dashboards.

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5 Implement the cost report actions

The fifth step in the cost report process is to implement the derived actions and improvements, ensuring they are effective, efficient, and sustainable. These should aim to enhance project performance, quality, and value, while still achieving the project objectives and goals. To do this, a plan of action should be created that outlines the steps, tasks, responsibilities, resources, and timelines for implementation. Additionally, a monitoring and evaluation system should be put in place to measure progress and results of the cost report actions. And a feedback and learning mechanism should be established to collect and share lessons learned and best practices from cost report actions. All of these should be implemented in a collaborative manner that involves and empowers the project team and stakeholders.

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6 Update the cost report process

The sixth step is to update the cost report process and procedures, ensuring they are aligned with the project needs, changes, and expectations. It is important to review and revise the cost report periodically, incorporating feedback and learning from the previous steps. The cost report process should include a policy that defines the purpose, scope, frequency, and format of the report. Additionally, a template should provide the structure, layout, and content of the cost report. Furthermore, a guideline should explain the data sources, inputs, methods, and calculations of the cost report. Quality assurance should also be included to ensure accuracy, completeness, and reliability of the cost report. To ensure success, the cost report process should be standardized, documented, communicated, and follow project management principles and practices.

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7 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?

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Stewart Humphreys

Associate at Rider Levett Bucknall
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One key item that the Cash Flow also provides, often shown on an "S-curve" is whether the Contractor is on programme. Comparing the "Actual" vs "Anticipated" expenditure allows you to question why is there a difference. It may be the contractor is behind / ahead of programme due to delays.

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Sunita Panich

Business and Engineering Support at WestGlen Consult
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In my experience, implementing earned value method to cost report has become more preferable as it can help to measure the actual spend according to the actual progress, not just cash flow basis. However, it does require well defined scopes with clear understanding on how to measure each progress and converting this into cost accurately.

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How do you verify cost report accuracy?

1

2

3

4

5

6

7

1 Review the cost report format

2 Validate the cost report data

3 Analyze the cost report results

4 Communicate the cost report findings

5 Implement the cost report actions

6 Update the cost report process

7 Here’s what else to consider

Construction

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How do you verify cost report accuracy?

1

2

3

4

5

6

7

1 Review the cost report format

2 Validate the cost report data

3 Analyze the cost report results

4 Communicate the cost report findings

5 Implement the cost report actions

6 Update the cost report process

7 Here’s what else to consider

Construction

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