Cost analysis is a core component of evaluating the true state of every engineering and construction project, but it can also be one of the most frustrating. The ability to accurately budget and forecast cost remains elusive for many construction organizations, chiefly due to the siloed nature of their financial, planning, scheduling, project controls and enterprise resource planning systems.

Rarely do organizations step back to evaluate their businesses’ holistic requirements, and how all of these systems will architecturally connect. Often the distinct, point solutions supporting the overall construction cost process flow are selected and owned by different parts of an organization. Because of this distributed ownership, the timing and the way systems are implemented often prevent a cohesive integration—or at the very least make it highly complex. While vendors are often experts in their niche, they lack the ability and understanding to integrate these systems across the entire cost process.

To help bridge this gap, organizations need to find ways to integrate data from each of these sources to deliver critical project insights and accurate forecasts, both before and throughout the lifecycle of a project.

Most project control solutions provide a point-in-time snapshot—a backward-looking view that can hide the true status of a project and prevent teams from realizing the benefits of a time-phased analysis of the budget, incurred cost, and the forecast. For many firms, the value of the effort to develop and maintain project schedules and plans that are disconnected from the project controls solution is diminished because critical insights are trapped in information silos.

Achieving New Efficiencies Through Integration

Cost analysis is traditionally viewed across two independent dimensions. The first is cost categories, meaning the budgeted and actual spend in specific categories such as material, labor and equipment. The second dimension is time, meaning when budgeted costs are to be incurred. To gain a more accurate picture of costs, at the present time and at project completion, project managers must be able to evaluate the project across both dimensions, enabling time-phased cost, cash-flow projections, and earned value.

Achieving this goal requires integration across the cost, scheduling, and project controls systems and functions. This integration enables teams to accurately understand the true cost of the work performed, the milestones reached to date and how those will factor into future spending forecasts. This view helps project owners and managers understand cost versus budget across time by syncing the budgeted cost curve with the incoming cost, as well as the forward-looking forecast predicting the overall financial performance at the completion of a project.

Finding the Right Tech Partners and Solutions

Organizations need to ask themselves whether they can accurately predict—and thereby avoid or mitigate—future obstacles and potholes. If the answer to this question is “no,” they need to identify the root cause for this and correct it for the health of the organization. To do so, project owners would do well to seek out technology partners and solutions that help project managers definitively bridge the budget/cost/time gap. That means they need to be able to integrate data from scheduling, financial, planning and project controls sources, unlocking forecasting insights.

Forecasting solutions should enable time-phased analysis that empowers users to answer key questions regarding performance in the current period, the entire project to-date and at completion. These solutions should also be easily tailored to specific projects and organizations, because one size does not fit all.

When evaluating cost analysis capabilities, organizations should adopt solutions that offer flexibility to mix-and-match methodologies in the same project and consider how well connected their cost control systems are with project scheduling and project costing systems. They must also align project period data with financial period data.

Engineering and construction projects are complex, and understanding the true and complete cost throughout the life of the project is essential to their success and profitability. That means bridging information gaps to get an unobstructed view into the past and present—and new levels of clarity for the future.

Economic Climate Drives Renewed Sense of Urgency

As in previous economic downturns, organizations are falling into two broad camps: those that cut and limit cost expenditure to conserve cash, and those that look at the downturn as an opportunity to retool for the eventual future business upturn. Prior to the pandemic, the construction industry had already begun a period of digital transformation.

Now many organizations have a renewed sense of urgency arising from challenging economic and worksite conditions, which is accelerating efforts to use technology to improve project outcomes. Taking the right technology steps to get the cost forecasting component right is critical to project success today and tomorrow.