Almost every project has variations. The problem is not that changes happen. The problem is changes that are not priced, approved and funded before the work goes ahead.
Why variations threaten funding
Lenders fund against an approved budget. If variations push the cost beyond it, the remaining funds may no longer be enough to finish the project. At that point the borrower must find extra money, often at short notice.
How to keep variations under control
- Price before you proceed. Agree the cost and time effect of a change in writing before the work starts.
- Keep a variations register. A simple list of every change, its cost and its approval status.
- Tell the QS. Approved variations are included in the cost to complete, so the lender sees an honest picture.
- Use contingency deliberately. Contingency should be spent on genuine unknowns, not on upgrades.
- Review regularly. Check the forecast final cost at each drawdown.
What is a cost-to-complete estimate?
It is an assessment of how much money is still required to finish the project, based on the work remaining and costs still to come. It is the number that tells you whether the undrawn funds are enough.
What to do if there is a shortfall
Identify the size of the gap and where it comes from as early as possible. Early warning gives you more options, such as value engineering, rescheduling or arranging extra funding.
Our Cost-to-Complete & Cost Management service tracks all of this for you.
