Cost Forecast (Construction)
Your best current answer to what this project will finally cost.
Quick Answer
A construction cost forecast is a projection of a project's final cost at completion, based on costs incurred to date, committed contracts, pending and potential changes, and an estimate of the remaining work. Compared against the budget, it shows the expected overrun or savings. It is updated regularly, usually monthly, as the project progresses.
The Full Picture
A budget says what a project was supposed to cost; actual costs say what has been spent so far. Neither answers the question owners and executives care about most: where will we end up? The cost forecast exists to answer that, so problems can be acted on while there is still work left to influence.
Mechanically, a forecast is built line by line, usually by cost code. For each line it combines actual cost to date, committed but unbilled costs such as subcontracts and purchase orders, approved and pending change orders, and an estimate to complete the remaining work. The sum is the estimate at completion (EAC). Comparing EAC to the current budget gives the projected variance. Earned value indices can inform the estimate to complete, but most construction forecasts also rely on the project team's judgment about remaining work.
In practice, project managers update the forecast in a monthly cost report. A line might show that drywall is fully bought out and tracking to its commitment, while a pending design change and an unresolved concealed condition add risk to the structural line. Forecasting potential changes, not just approved ones, is what separates a useful forecast from an accounting report.
Forecasting starts in preconstruction. During design, the team forecasts final construction cost at each milestone, and the quality of the precon estimate, its cost code structure, and its documented assumptions determine how easy it is to forecast accurately once construction starts. A forecast is only as good as the baseline it compares against.
Real Examples
Common Misconceptions
People assume: A cost forecast is actual costs plus remaining budget.
Actually: That assumes the remaining work will cost exactly what was budgeted. A real forecast re-estimates the remaining work and includes pending changes and risks, which is where overruns usually hide.
People assume: Forecasting only matters once construction starts.
Actually: Forecasting final cost is just as important during design, when the owner decides whether to proceed, change scope, or adjust the budget. Construction forecasting builds on the precon baseline.
Frequently Asked Questions
What is estimate at completion (EAC)?
EAC is the forecast total cost of the project when finished: actual costs to date plus the estimated cost to complete the remaining work, including committed costs and expected changes.
How often should a construction cost forecast be updated?
Most contractors and owners update it monthly as part of the cost report, and more often when significant changes, buyout results, or risks arise.
What goes into a construction cost forecast?
Actual costs, committed costs such as subcontracts and purchase orders, approved change orders, pending and potential changes, an estimate to complete remaining work, and remaining contingency, all compared against the current budget.
How does cost forecasting relate to earned value management?
EVM provides objective performance measures, such as the cost performance index, that can be used to project final cost. Many construction forecasts combine those measures with the PM's line-by-line judgment of remaining work.