Last edited 26 Jul 2019

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:

Some factors that cause delays and cost overruns may not be the contractor's fault:

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:

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.

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