The cost capture process is 3 step approach.

Step 1 – Cost capture template, often referred to as Cost Plan / CVR / P&L.

Using the estimate, you would create a baseline forecast based on first principle costs. So, what are first principle costs? First principle costs are individual resource rates based on a duration / unit basis extrapolated from the Bill of Quantities, Programme and Activity Schedule commonly known as defined costs. i.e. labourer for £XX.XX amount per day x Y number of days or a XXm3 of concrete per £XX.XX amount per m3. All resources are captured within this document from staff, labour, plant, materials, subcontractors, welfare etc from the mobilisation to practical completion. Remember, this is a forecast. The more detail you include, the more likely it will match the actual costs however, do not expect it to remain the same. Changes to the scope, changes to the legislation, inflation and such will most likely increase these rates. Therefore, a risk allowance / contingency must be included. This will be put into a weekly spend profile so weekly / monthly reviews can be monitored, compared and reviewed.

Step 2 – Monitor, compare and review process.

Following on from Step 1, you must regularly reconcile forecasts with actuals on a first principle basis. i.e. you have allowed 50m3 of concrete at £150.00 per m3 where the actual is 47m3 of concrete at £152.00 per m3, are you running at a profit or a loss? This is done to every cost / resource element that you have added on your forecast. This will soon highlight savings, losses and items that have been missed off your forecast. Discrepancies must be queried, understood and managed. On the above example, you will try to find a supplier who is willing to match the forecasted rate. On a monthly basis, high level figures are reported. Discrepancies will need to be highlighted and measures are to be undertaken that will maintain or improve margin.

Step 3 – Margin management.

Cost trends should be noticeable, such as current cost performance vs projected costs and scheduled activity performance against tendered activity schedule. This will determine if you are currently overspending / underspending or overachieving / underachieving (Cost Performance Index / Schedule Performance Index which is to be explained in more advanced courses). If you have successfully captured and monitored costs then your forecast costs at completion will match actual costs. If you have failed to capture costs correctly, then you run the risk of spending more than the forecast costs at completion. All the above is fundamental to monitor, review and manage the margin.

It is worthy of note that your overheads, fees and percentages will be added to the defined costs and must be compared against total project value.