Cost Reporting FAQ Based on RICS Professional Guidance 1. What is the main purpose of cost reporting in construction projects? The primary purpose of cost reporting is to provide the client with clear and accurate information about the projected final cost of the construction project. This forecast, also known as the "outturn cost", can be presented as a direct figure or as a variance against the pre-determined budget. 2. What key factors influence the final construction cost (outturn cost)? Several factors can impact the final project cost. These include: Fixed Costs: Costs agreed upon for defined work and services outlined in the contract. Variable Costs: These costs can fluctuate and encompass: Provisional Sums: Allowances for undefined or partially defined work. Prime Cost Sums: Adjustments for work where the full specification is determined later. Daywork Allowances: Costs for labor, plant, and materials for ad-hoc work. Variations: Changes to the original contract, including: Contract Instructions: Formally issued changes to the work. Anticipated Instructions/Early Warnings: Changes expected but not yet formally issued. Loss and Expense: Additional costs resulting from delays or disruptions. Fluctuations: Adjustments to address market price changes in materials, labor, etc. Risk Allowances: Funds set aside to cover unforeseen circumstances. 3. How frequently should cost reports be prepared and issued? While project-specific needs and client preferences can influence reporting frequency, the industry standard aligns with the typical monthly payment cycle. Therefore, monthly cost reporting is recommended to ensure the client remains informed about cost movements. 4. Why is it beneficial to have separate cost reports for different budget holders? Dividing the cost report into sections for each budget holder (e.g., architect, structural engineer, services engineer) allows for clearer accountability and cost control. Each stakeholder can monitor their specific area of responsibility, making it easier to identify potential overruns or savings early on. 5. How should risk allowances be managed and reported throughout a project? It's generally advisable to use specific risk allowances for identified potential cost risks rather than relying on a general contingency. As the project progresses and actual costs become clearer, the corresponding risk allowances should be reduced. Any remaining funds can be released to the client or allocated to other project needs. 6. What are some recommended ways to handle loss and expense claims from contractors within cost reporting? Transparency is key. The cost report should clearly indicate the amount the contractor is claiming for loss and expense. If the quantity surveyor is tasked with assessing the validity of these claims, their findings should also be included. It's essential to communicate to the client that assessing loss and expense can be complex and may require detailed information from the contractor, potentially delaying a final assessment. 7. How should Value Added Tax (VAT) be addressed in cost reports? To avoid confusion, cost reports should clearly state that all figures are exclusive of VAT. The specific VAT implications for a project are dependent on various factors related to the client, the project itself, and the prevailing tax regulations. 8. What is the significance of the quantity surveyor's presentation of the cost report to the client? Direct communication is crucial for effective cost management. Simply sending a cost report via email or post can lead to misunderstandings. By presenting the report in person, the quantity surveyor can clearly explain cost fluctuations, potential risks, and opportunities for savings, leading to more informed decision-making by the client.   Join the Quantity Surveying Community here for free: https://quantity-surveyors-community.circle.so/join?invitation_token=d01659fb417a6d0bb66a141860db830463e11838-b58c7d98-e71c-4404-b38