Cost Forecasting

Managing a construction project’s costs requires careful planning to avoid shortfalls that can adversely affect payment schedules and stakeholder reputations. Cost forecasting is a valuable practice in establishing the relevant expenditures required at the various payment stages of a project. Efficient management of project income is crucial in making timely payments to the stakeholders involved in the project.

An important aspect of cost forecasting is understanding the payment system for the project based on the contractual provisions and, accordingly, retrieving information from the project schedule that will help map out the funds required throughout the project. Spire’s experienced construction cost consultants can assist clients in developing cost forecasts that are integrated with the project schedule.

Benefits of Cost Forecasting in Construction 

As a critical aspect of construction cost planning, cost forecasting is beneficial in laying the foundation of a construction project. Here are some of the ways this process supports project success: 

• More accurate estimates: A comprehensive site analysis that includes all project requirements, from initial design concepts to site-specific challenges, helps create more precise estimates and minimize cost surprises.

• Improved budget control: Assessing the relevant expenses allows professionals to negotiate better deals and remove unnecessary expenses, resulting in cost savings. 
• Timely completion: Accurate analyses and a clear understanding of the financing needed for different aspects of the project help to ensure work is completed on schedule. 
• Enhanced customer satisfaction: Completing projects according to initial expectations can help construction companies build more trust and credibility with clients, improving the customer experience. 

Challenges of Cost Forecasting in Construction 

Construction cost forecasting has three main challenges that are essential to keep in mind before and during the project: 

• Material costs: Material costs can change frequently — and sometimes drastically — requiring you to modify your estimates or offer your clients alternate material options. Because of this potential market volatility, it’s essential to perform regular market and project scope of work analyses to stay informed. 
• Unpredictable changes: When client expectations evolve or sudden changes occur with the weather or economy, construction companies may need to adjust their forecasts. Having risk mitigation plans and periodic reviews in place can improve their preparation for unpredictable changes. 
• Thorough communication: Sometimes, construction companies only communicate with suppliers and subcontractors after the project has begun, which means they realize too late that certain resources are now unavailable or cost more. It is crucial to look into all resources, services, and costs beforehand to get an accurate account of everything involved in the project’s scope. 

Our Approach to Construction Cost Forecasting 

A clear understanding of project contractual provisions and a well-defined project schedule are critical to the development of an accurate cost forecast. As part of monitoring project risks, Spire adopts a systematic approach to cost forecasting that involves the following steps:

1. Contract analysis: Our industry experts start by reviewing the contract structure and requirements. This process helps us thoroughly understand the objectives your project needs to complete to meet your client’s needs. 
2. Analyzing project scope of work: We conduct a comprehensive analysis of all project work requirements down to the smallest details, covering anything that may heavily impact the project’s duration and final cost. 
3. Analyzing project payment system: We compare the past and current cost and revenue trends of your company’s projects to account for any extra expenditure patterns and any resources and services that might increase in cost. 
4. Developing project Work Breakdown Structure: After gaining a solid understanding of the project work and cost expectations, our professionals will develop a detailed compilation of the project work structure and schedule. 
5. Developing project Cost Breakdown Structure: Our Cost Breakdown Structure will outline all the relevant costs associated with construction project tasks. 
6. Integrating project schedule with cost and resource data: In this step, we compare the schedule with cost and resource needs to ensure all project tasks are accounted for. 
7. Identifying key performance indicators (KPIs): Our experts will review all factors that should be considered to further improve cost forecast accuracy. 
8. Performing a cost forecast that considers optimistic, pessimistic, and most likely scenarios: To test cost forecast accuracy, we consider all scenarios that might impact the final cost of the project, from the outcomes we can reasonably anticipate to the extreme positives and negatives.
9. Formulation of risk mitigation plan: After considering all potential risks, we’ll incorporate a risk mitigation plan to help ensure construction professionals execute project tasks smoothly. 
10. Periodic reviews of project risk register: After you begin your project, our professionals will continually review the project’s progress and assess any new or existing risks to identify necessary changes to risk mitigation strategies.

Get Construction Cost Forecasting Support From Spire 

At Spire, we assist with initial and ongoing cost forecasting to account for any sudden changes, empowering you to make more informed decisions. We also help you build a better workflow through the forecasting work structure to help mitigate resource and service management issues. For construction cost forecasting support, contact our team for more information today.