Committed cost is the value of work a builder has authorized, actual cost is the value already invoiced or paid, and projected final cost is the current estimate of what the project will cost at completion. Reviewing all three figures together shows budget pressure before the pressure reaches the bank account.
What is the difference between committed cost and actual cost?
A purchase order, subcontract, or approved change order creates a commitment. An invoice, credit-card charge, or payroll entry creates an actual cost. A framing subcontract for $48,000 is therefore a $48,000 commitment when it is signed. If the framer has invoiced $31,000, the project has $31,000 in actual cost and $17,000 remaining on that commitment.
The distinction matters because actual-cost reports look healthy early in a project. A builder may have spent only $92,000 against a $430,250 budget while already having signed enough subcontracts and purchase orders to consume most of the available contingency. Commitments expose those future obligations while there is still time to adjust scope, sequencing, or procurement.
Which figures belong in a construction cost forecast?
A useful forecast keeps five values for every cost code:
| Value | What it answers |
|---|---|
| Current budget | How much is authorized for this scope? |
| Committed cost | How much work has been contracted or ordered? |
| Actual cost | How much has been invoiced or paid? |
| Cost to complete | What work remains outside recorded actuals? |
| Projected final cost | Where is this line expected to finish? |
Projected final cost usually equals actual cost plus the best current estimate of cost to complete. On fully contracted work, the open commitment provides a strong starting point for cost to complete. On allowances, self-performed work, and scopes that have not been bought out, the project manager still needs to enter a forecast.
How does the forecast work on a real budget line?
Consider the framing line on 926 Stratford. The current budget is $52,000. The signed framing subcontract is $48,000, and approved extras add $2,400. The framer has invoiced $31,000. The open commitment is $19,400, which produces a projected final cost of $50,400 if no further scope is expected. The line is forecasting $1,600 under budget.
The plumbing line tells a different story. Its current budget is $34,000, actual cost is $18,500, and open commitments total $14,000. The project manager also knows that a $3,200 water-heater upgrade has been approved by the buyer but has not reached the purchase-order system. The correct projected final cost is $35,700. Recording the known upgrade turns an apparent $1,500 cushion into a $1,700 forecast overrun.
When should commitments enter the budget?
A commitment should enter the project record when the builder authorizes the vendor to proceed. Waiting for the first invoice can hide the obligation for weeks. The source may be a signed subcontract, an accepted bid, a purchase order, or an approved change order. Each source needs a vendor, cost code, authorized amount, effective date, and project reference.
Verbal authorizations need the same treatment. If the superintendent tells the electrician to add a service upgrade, the office should record a pending commitment that day and replace it with the signed document when pricing is confirmed. The pending status makes uncertainty visible without pretending the amount is final.
How should invoices reduce an open commitment?
Every invoice should match a commitment line whenever one exists. Posting the invoice raises actual cost and lowers the remaining commitment by the same approved amount. The total exposure stays stable until a change order, credit, or forecast revision changes it.
An invoice above the remaining commitment needs review before posting. The overage may be an approved extra that missed the change-order workflow, a duplicate bill, a quantity error, or a valid final reconciliation. Routing the exception to the project manager protects the forecast and the vendor relationship because the question gets answered before payment.
What should the weekly cost review cover?
A weekly review should focus on changes since the prior review. The project manager and bookkeeper examine new commitments, invoices without commitments, commitments with expired completion dates, cost codes with negative remaining budget, and manual forecast overrides. A 20-minute review works when the exceptions are already grouped by project and cost code.
The review should end with a recorded projected final cost for every active cost code. Empty forecasts create false confidence because totals exclude work that everyone knows is still coming. A reasonable estimate with an owner and a review date is more useful than a blank.
Which reporting mistakes distort projected final cost?
- Counting commitments and invoices twice. Actual cost that draws down a purchase order belongs inside the commitment total, rather than beside it as an additional obligation.
- Leaving completed commitments open. A final invoice below the purchase order value leaves a false obligation unless the unused balance is closed.
- Ignoring unbought scope. An empty commitment column does not make the remaining work free. The project manager must forecast scopes that have not been awarded.
- Using contingency to hide overruns. Contingency transfers should be approved and traceable so the original variance remains visible.
How does this improve draw and portfolio reporting?
Draw reporting explains work completed and money requested. Cost forecasting explains the project’s remaining exposure. Connecting the two helps a builder spot cases where billing progress is ahead of physical progress or where the unfunded cost to complete is growing. At portfolio level, projected final cost gives leadership a consistent view of expected margin across every active job.
The operating rule is straightforward: record the obligation when work is authorized, match each invoice to that obligation, and revise cost to complete whenever the project team learns something new. That sequence turns the budget into an early-warning system and supports a consistent construction budget validation process across the portfolio.