Cost control on site: interim valuations, variations and the final account

A site that looks well planned on paper remains exposed to many uncertainties in execution: unexpected discoveries, changes requested by the client, design errors detected late, unfavourable market conditions. Without regular cost control these accumulate silently and take effect at handover, when it is too late to act.

Cost control on site serves three essential functions: checking that payments to contractors correspond to work actually carried out, tracking the movement of the budget in real time, and formalising changes to the works in a contractually sound way.

ℹ A figure worth remembering On projects without structured cost control, the average overrun observed at handover is of the order of 12 to 18 % of the initial contract sums. On projects with monthly monitoring it falls below 5 %. The difference is precisely the ability to act before the drift becomes irreversible.

An interim valuation is the monthly document by which each contractor declares the progress of its work and claims the corresponding payment. It sets out cumulatively everything carried out since the start of the site, valued at contract prices.

The economist checks each valuation received: consistency between the progress declared and that observed at the site meeting, accuracy of quantities, correct application of the unit rates or the lump sum, and proper account of contractual deductions such as retention and any advance on variations.

• Progress declared ahead of progress actually achieved: pulling payment forward, common at month end.
• Wrong prices applied: using the price from a variation not yet signed, or a unit rate altered unilaterally.
• Duplication with a previous valuation: an item already settled reappearing.
• Retention omitted: the statutory 5 % deduction left out.

In practice the economist endorses the valuations and issues a payment certificate that the client uses to authorise settlement. This validation circuit is the principal safeguard against payments not properly due.

A variation is a contractual modification of the works contract: works added, works omitted, programme changed, technical specifications altered. It must be formalised in writing and signed by both parties before the modified work is carried out, failing which the contractor may have no contractual basis on which to claim the additional price.

• Additional works: work not in the original contract, requested by the client or made necessary by a discovery on site. They are covered by a variation order or a purchase order according to their value.
• Substituted works: replacing one specified item with another of a different nature. They involve a credit for the omission and a debit for the addition, with a balance that may be positive or negative.
• Price revision: adjusting contract prices against the contractual revision indices such as BT01, on long-duration contracts. The economist calculates the revisions using the parametric formula in the administrative conditions.

The economist examines each request: whether the work is necessary, negotiation of prices with the contractor on the basis of the contract's price build-ups or of market comparisons, drafting the variation and following it through to signature. The budget dashboard is updated accordingly.

ℹ Point of vigilance Unformalised variations are a major source of dispute at handover. A contractor who carries out additional work without a signed order or variation may find itself legally unable to be paid for it. Conversely, a client who approves changes verbally without formalising them is exposed to end-of-project claims that will be difficult to contest.

The budget dashboard is the instrument for steering the site economically. For each package it brings together the original contract sum, the variations signed, the current contract sum, the cumulative valuations and the balance outstanding. It gives the client a clear, current view of the project's financial position at any moment.

How to read it: the heating and ventilation package is running 17 % above its original contract, on cumulative variations of 12,500 €. That signal should trigger a review of the causes and, if necessary, a discussion with the client about compensating savings on other packages.

Handover is the act by which the client takes possession of the works and acknowledges, with or without qualifications, that they comply with the contract. It starts the statutory warranty periods: the one-year defects liability period, the two-year warranty on equipment, and the ten-year structural liability.

The economist attends the handover and makes sure any defects are properly recorded in the certificate: a precise description of what was found, the period allowed to put it right, and any effect on payment of the balance.

The final account is the document that definitively settles the position between client and each contractor. It brings together all the work carried out, the variations, the price revisions, any damages and the deductions, arriving at the final amount due.

On public contracts the final account procedure is strictly governed by statutory time limits. Failing to observe them exposes the client to interest for late payment, and the contractor to losing its claims if it does not react within the periods allowed.

On private contracts the periods are set by the administrative conditions. The economist sees that they are observed and supports the client in handling any dispute.

Quostra provides cost control on site for every type of project, working directly with the architect, the engineers and the contractors. The assignment can cover the whole construction phase, from the first valuation to the final account, or focus on specific tasks: assessing a complex variation, drawing up the final account, reviewing disputed valuations.

Monthly deliverables include endorsement of the interim valuations with a payment certificate, an updated budget dashboard and a summary note on the drift identified. The final account is delivered within 5 to 7 working days of receiving the contractor's final statement.

You have better things to do. Submit your project on quostra.com and an economist takes on your cost control and produces your final account.

Cost control on site is the logical continuation of the cost studies produced during design. It ensures the commitments made at contract are honoured, that changes are formalised before they are executed, and that the project's financial closure takes place on contractually sound terms. Neglecting this phase exposes the client to financial surprises whose effects can far exceed the cost of the monitoring itself.