Commitment Forecasting

One of the more powerful cost control processes that can be implemented on a Project is Commitment forecasting. This is a process whereby a contract owner performs an analysis of the final cost for a commitment taking into account all known variations and other changes to the Contract.

This is grass-roots forecasting, at the level of the Contract Schedule of Values (CSOV), variation registers, site instructions etc. It does not need to be performed by a cost engineer (I would almost go so far as to say should not). …but it must have input from someone who has intimate knowledge of the contract.

There is no mention of CPI / earned value / budget in this forecast. It is about quantities and rates, who is doing what to whom, where are claims likely to come from etc. It can be done on a scrap of paper for all I care.

It is the type of forecast that project engineers have been doing for years, and as controls professionals, we ignore this rich set of information at our peril.

Done properly and regularly, this type of forecasting empowers the people executing the contract, because it is expressed in their language and gives them a simple means of informing the Controls processes.

We may take this information and analyse it in much more detail, with more advanced techniques, and possibly even come up with a different answer to include in the actual cost report.

But as long as the reasoning for the difference is sound and explained clearly, I have yet to find a better method of getting the people actually managing the Contract to have buy-in to the forecasting process that is used to inform the overall project forecast.