Part VI — Project Controls

Cost, Time, and Money

There is a particular kind of project manager who is well liked, runs a clean site, keeps the owner happy, gets the building finished more or less on time — and loses money on every job.

They are not lazy or dishonest. They simply do not know, at any given moment, whether the project is making money, and by the time the answer arrives it is a fact rather than a decision.

Part VI is the machinery that prevents that.

What "controls" actually means

The word is misleading. Project controls do not control anything. They are a measurement and forecasting system whose entire purpose is to convert a vague feeling into a number early enough that a decision is still possible.

Three questions, asked continuously:

  1. Are we going to finish on time? (Chapters 29, 30, 33)
  2. Are we going to make money? (Chapters 28, 30, 34)
  3. When something changes, what is it worth, and who pays? (Chapters 31, 32, 33)

Notice that all three are forward-looking. A cost report that tells you what you have spent is accounting. A cost report that tells you what it will cost to finish is management. That distinction is Chapter 28's threshold concept and it is the single most common failure in this entire discipline: cost-to-complete, not cost-to-date, tells you whether you are making money. A job that is 60 percent billed and 75 percent spent is already in trouble, and every number on the page can look fine.

The seven chapters

Chapter 28 — Cost Control. Cost codes, budget loading, committed versus actual versus forecast cost, and the cost-to-complete forecast. Also the honest section about job-borrow and optimistic forecasting — how a project manager who does not want to deliver bad news can make the report say almost anything for about four months.

Chapter 29 — Schedule Control. Monthly updates, as-built logic, variance analysis, and the difference between a delay you can absorb and a delay you must recover. Then acceleration: what compression actually costs, worked against the canonical $168,000 that bought seventeen of twenty-three days on the Northgate job — and the non-monetary bill that came with it.

Chapter 30 — Earned Value Management. Planned value, earned value, actual cost, and the four indices that fall out of them. Presented not as a certification topic but as the only technique that answers cost and schedule questions with the same arithmetic, and with an honest account of where it works well on a construction project and where it misleads.

Chapter 31 — Change Order Management. Identifying a change, pricing it, negotiating it, and documenting it. Its threshold concept — the cost of a change is rarely the cost of the work — covers the part most contractors give away for free: impact, disruption, resequencing, and lost productivity. This is also where CO #14 gets fully dissected.

Chapter 32 — Progress Payments. The schedule of values, the pay application, retention, lien waivers, and the cash-flow curve. Its threshold concept is the one that ends contractors: cash flow is not profit. A company can be profitable on every job it runs and still not make payroll.

Chapter 33 — Claims, Disputes, and Delay Analysis. Entitlement, causation, and damages as three separate proofs, all of which you must win. Delay analysis methods, concurrent delay, and the uncomfortable truth that most claims fail not because the contractor was wrong but because the contractor cannot prove what happened.

Chapter 34 — Construction Finance and Accounting. The company view. Percentage-of-completion accounting, the work-in-progress schedule, over- and under-billing, working capital, bonding capacity, and the specific financial pattern by which growing contractors go out of business while showing a profit.

The thing these seven chapters share

Every one of them is an application of the book's second theme:

The schedule and the budget are the same conversation.

A day is $10,650 on Northgate. A twenty-three day slip is $244,950. An acceleration that buys back seventeen days for $168,000 is a nearly break-even trade financially and a decisive one commercially, because the owner's interim clinic lease expires on October 1. You cannot make that decision by looking at a schedule, and you cannot make it by looking at a budget. You make it by looking at both at once, which is what project controls are for.

What you should be able to do at the end of Part VI

  • Build a cost-code structure, load a budget, and produce a cost report with a defensible cost-to-complete forecast.
  • Update a CPM schedule with as-built data, analyze the variance, and price recovery options.
  • Compute planned value, earned value, actual cost, the cost and schedule variances, CPI, SPI, and estimate at completion — and explain what each one is and is not telling you.
  • Price a change order completely, including impact and time, and document it so that it survives.
  • Build a schedule of values, prepare a pay application, manage retention and lien waivers, and forecast cash flow.
  • Perform a delay analysis, distinguish excusable from compensable delay, address concurrency, and assemble a claim narrative that proves all three elements.
  • Read a work-in-progress schedule and explain what it says about the health of the company.

Chapters in This Part