Cost certainty
For clients and contractors in the construction industry, cost certainty is one of the most important performance criteria. It has a direct impact on resources.
Cost certainty is the likelihood that before a project, or part of a project starts, it will be completed within the agreed budget. Cost certainty is affected by time certainty which is the likelihood that a project, or part of a project, will be completed within the agreed time period agreed.
Construction clients often hold these two concepts as their top priorities as delays and cost overruns can be disastrous. It is for this reason that clients will tend to hold a contingency fund to deal with unforeseen eventualities.
For contractors, it may mean lower than expected profits as a result of:
- Increases in overheads.
- Hiring more operatives.
- Longer plant-hire periods.
- Storage of materials costs.
- Delayed payments from the client.
Some factors that cause delays and cost overruns may not be the contractor's fault:
- Clients making changes.
- Unforeseen ground conditions.
- Delays in material or equipment supplies.
- Inclement weather.
- Labour disputes.
- Changes in market conditions.
However, a 1996 study by the Construction Industry Board (CIB) revealed that cost and time certainty is more often than not under the contractor’s control, resulting from:
- Poor management.
- The contractors’ inability to predict and control the time needed to complete a project.
- Inaccurate material estimating.
- Poor productivity.
- Inadequate planning.
- Poor site management.
Clients will tend to have more confidence in contractors who have a solid record of reliability when it comes to cost certainty and so are likely to rate highly.
Cost certainty tends to improve as a project progresses, as some of the works are complete, and so their actual cost is known, and some risks may have been avoided or mitigated. It is for this reason that the client may reduce the amount they hold as contingency as the project proceeds.
[edit] Related articles on Designing Buildings Wiki
- Budget.
- Capital costs.
- Construction costs.
- Construction price and cost indices.
- Cost-benefit analysis in construction.
- Cost control.
- Cost engineering.
- Cost information.
- Cost of building.
- Cost overruns.
- Cost plans.
- Cost vs price.
- Front-loaded costs.
- Estimate.
- Hard costs v soft costs.
- Irrelevant cost.
- Life cycle assessment.
- New Rules of Measurement.
- Operational costs.
- Other development/project costs.
- Quantity surveyor / Cost consultant.
- Relevant cost.
- Whole life cost.
Featured articles and news
ECA Industry Awards 2024 shortlist revealed
22 leading businesses from across the electrotechnical and engineering services sector.
Government unveils Skills England strategy
Skills England to transform opportunities and drive growth.
New Government Hub for York Given Planning Green Light
For up to 2,600 civil servants, due for completion by 2028.
Construction Skills Certification Scheme cards
July update on Professionally Qualified and Academically Qualified Person Cards.
BSRIA Briefing 2024, November 22
Sustainable Futures: Redefining Retrofit for Net Zero Living.
The CLC on driving competency in the retrofit sector
Previously published roadmap on skills for net zero.
The first labour government King's speech in fifteen years
Construction industry reactions, support and some concern.
CIOB Retrofit of Buildings Technical Information Sheet
What retrofit is, the approach to be taken and processes to be followed.
Adapting Historic Buildings for Energy and Carbon Efficiency
Historic England advice note 18, free download published.
10 retrofit projects revisited 10 years after completion.
Information orders, building liability orders and SPVs
Key BSA terms and how they impact special purpose vehicles.
Listed despite problems with its design.
Zen and the art of cycling exploration.
Design Council Homes Taskforce launched
To support government 1.5 million homes target within UK climate commitments.