Cost Value Reconciliations (CVR)
Cost Value Reconciliation (CVR) is a crucial financial management tool used to monitor and control project finances. It involves comparing the actual costs incurred on a construction project with the value of work completed to date. This comparison helps ensure that projects remain financially viable and highlights any discrepancies between costs and revenue.
Actual costs incurred might include direct costs (materials, labour, subcontractor fees, and any other expenses directly related to the construction work) and indirect costs (overheads, administrative expenses, and other costs not directly tied to specific project activities.)
The value of work completed (value earned) might include work certified (the value of work that has been completed, inspected, and approved by the client or project manager) and work not yet certified (the value of work that has been completed but not yet certified).
Cost vs. value compares the costs to date (the total actual costs incurred up to a specific date) and the value to date (the total value of work completed and certified up to that same date).
By comparing costs and value, CVR helps assess the profitability of a project. This analysis can inform decision-making and adjustments to project execution strategies. CVR helps track the financial health of a project by continuously comparing costs against the value of work done. This enables early detection of cost overruns and other financial issues. Understanding the timing of costs and revenue is critical for managing cash flow. CVR provides insights into when payments are due and when revenue will be received, aiding in effective cash flow planning.
CVR highlights financial risks early, allowing project managers to take corrective actions to mitigate potential financial losses. Regular CVR reports provide transparency and accountability, ensuring that stakeholders are informed about the project's financial status.
The process of CVR might include:
- Gathering detailed information on costs incurred, including invoices, receipts, payroll records, and other financial documents.
- Assessing the value of work completed, often through site inspections and progress reports. This might involve input from quantity surveyors and project managers.
- Comparing the actual costs against the value of work completed. Analysing any discrepancies and investigate the reasons behind them.
- Generating CVR reports that summarise the financial status of the project. These reports typically include key metrics such as cost to date, value to date, profit margins, and cash flow projections.
- Reviewing CVR reports with project stakeholders and take necessary actions to address any issues identified. This could involve adjusting project plans, renegotiating contracts, or implementing cost-saving measures.
[edit] Related articles on Designing Buildings
Featured articles and news
RIBA Principal Designer Practice Note published
With key descriptions, best practice examples and FAQs, with supporting template resources.
Electrical businesses brace for project delays in 2025
BEB survey reveals over half worried about impact of delays.
Accelerating the remediation of buildings with unsafe cladding in England
The government publishes its Remediation Acceleration Plan.
Airtightness in raised access plenum floors
New testing guidance from BSRIA out now.
Picking up the hard hat on site or not
Common factors preventing workers using head protection and how to solve them.
Building trust with customers through endorsed trades
Commitment to quality demonstrated through government endorsed scheme.
New guidance for preparing structural submissions for Gateways 2 and 3
Published by the The Institution of Structural Engineers.
CIOB launches global mental health survey
To address the silent mental health crisis in construction.
New categories in sustainability, health and safety, and emerging talent.
Key takeaways from the BSRIA Briefing 2024
Not just waiting for Net Zero, but driving it.
The ISO answer to what is a digital twin
Talking about digital twins in a more consistent manner.
Top tips and risks to look out for.
New Code of Practice for fire and escape door hardware
Published by GAI and DHF.
Retrofit of Buildings, a CIOB Technical Publication
Pertinent technical issues, retrofit measures and the roles involved.
New alliance will tackle skills shortage in greater Manchester
The pioneering Electrotechnical Training and Careers Alliance.