Construction cost control is what separates profitable contractors from those that discover their losses once the project is over. A good estimate is not enough: every week or every month you have to compare what was planned with what is actually being spent.

In this guide we explain a practical method to control the costs of a project, detect variances early and correct them.

Why construction costs drift

The most common causes are:

  • A poorly calculated budget: optimistic productivity rates, forgotten waste or outdated prices.
  • Design changes that are not priced or approved in time.
  • Uncontrolled purchasing: orders outside the budget, without comparing quotes.
  • Low productivity of crews or subcontractors.
  • Idle equipment or equipment rented longer than needed.
  • Delays that increase indirect costs (site supervisor, site cabins, crane).
  • Lack of information: actual costs arrive late or mixed up between projects.

Step 1: Turn the sales budget into a cost budget

The estimate you hand to the client includes overheads and profit. To control the project you need the cost budget (or target budget):

  • Recalculate each line item with your actual expected costs.
  • Replace line items with the subcontractor quotes you have awarded.
  • Add the detailed indirect site costs.

The difference between sales price and cost is the project's planned margin. Learn how to calculate each line item in unit price analysis (UPA).

Step 2: Allocate every cost to its project and line item

Every expense must have a destination:

  • Material purchases: order → delivery note → invoice, with project and line item.
  • Subcontractors: contract and certifications with their line item.
  • Own labor: timesheets with hours per line item.
  • Equipment: hours of use or rental days per project.
  • Indirect costs: assigned to the project.

Without allocation there is no control. This is where spreadsheets fail and where an ERP makes the difference.

Step 3: Compare planned and actual cost

For each line item and section, compare:

  • Planned cost for the quantity executed (quantity executed × cost price).
  • Actual cost allocated.
  • Variance = actual cost − planned cost.

Careful: comparing actual cost with the total budget leads to wrong conclusions. If 40% of a line item has been executed, compare against 40% of its planned cost.

Step 4: Use the earned value method

Earned value (Earned Value Management) combines cost and schedule in three indicators:

  • PV (planned value): planned cost of the work that should be done by the date.
  • EV (earned value): planned cost of the work actually done.
  • AC (actual cost): what has actually been spent.

From them you derive:

  • CPI (cost performance index) = EV / AC. Below 1 → you are spending more than planned.
  • SPI (schedule performance index) = EV / PV. Below 1 → you are behind schedule.
  • CV (cost variance) = EV − AC.
  • SV (schedule variance) = EV − PV.
  • EAC (estimate at completion) = BAC / CPI, where BAC is the total cost budget. It is the simplest projection: it assumes current performance continues.

Example

A project with a cost budget (BAC) of €500,000. In month 4:

  • PV = €200,000
  • EV = €180,000
  • AC = €195,000

Results:

  • CPI = 180,000 / 195,000 = 0.92 → for every euro spent, €0.92 of work is produced, in planned-cost terms.
  • SPI = 180,000 / 200,000 = 0.90 → the project is 10% behind plan.
  • CV = −€15,000; SV = −€20,000
  • EAC = 500,000 / 0.923 ≈ €541,667 → if nothing changes, the project will cost about €41,667 more than planned.

BIM 2.0 for Odoo calculates the earned value of each project from the budget, the progress certifications and the actual costs recorded.

Step 5: Analyze variances and act

When a line item deviates, ask:

  • Is it a price problem (we bought at a higher price) or a consumption problem (we used more material or hours)?
  • Is it a one-off or will it repeat in the rest of the line item?
  • Is it attributable to the client (design change) and therefore claimable as a variation order or a contradictory price?

Typical actions:

  • Renegotiate with suppliers or switch supplier.
  • Reorganize crews or review the construction method.
  • Adjust the schedule to reduce indirect costs.
  • Formalize the changes with the client.

Step 6: Review at a fixed frequency

Set up a monthly project financial close meeting with the site manager, the technical office and administration:

  1. Production for the month (certified to date).
  2. Actual cost for the month and to date.
  3. Actual margin versus planned.
  4. Forecast at completion.
  5. Corrective actions and owners.

Complement this review with a weekly project tracking of progress and deadlines.

Key indicators for cost control

  • Planned margin vs actual margin (%).
  • CPI and SPI.
  • Variance by section.
  • Labor cost per unit executed.
  • Purchases outside the budget (% and amount).
  • Accumulated indirect costs vs planned.
  • Certified production vs work pending certification.

How a construction ERP helps

With spreadsheets, actual cost arrives late and with errors. A construction ERP such as BIM 2.0:

  • Allocates purchases, timesheets, attendance and rentals to each project without re-entering data.
  • Can alert you to purchases that exceed the budget.
  • Shows planned vs actual cost per line item in real time.
  • Calculates earned value and cost-benefit analysis.
  • Connects control with progress certifications and invoicing.

If you are evaluating tools, see project control software: how to choose it.

Frequently asked questions

What is a project variance?

It is the difference between planned and actual cost (or schedule). It can be positive (savings) or negative (overrun).

How often should costs be controlled?

A monthly financial close, aligned with certification, plus a weekly follow-up of the most significant costs, is recommended.

What percentage of variance is acceptable?

There is no figure valid for every project: it depends on the type of project and the planned margin. In any case, every negative margin variance should be analyzed. The important thing is to detect it early, while there is still room to correct it.

Conclusion

Controlling the costs of a project is a process: cost budget, rigorous allocation, planned/actual comparison, earned value and corrective actions. With the right tool, it stops being a report at the end of the project and becomes a real-time control panel.

👉 Request a BIM 2.0 demo and see the earned value of a real project.