By Artem Korsakov ·
A construction cost forecast answers the question: how much will it cost to complete the project, given what has already happened and what is still to come? For an industrial contractor, the original estimate may stay the same while equipment is delayed, a crew changes work front and the equipment rental period lengthens. To see this in advance, you need to update the cost of the remaining work and link changes to their grounds.
In short: the final cost is made up of costs already incurred and a current estimate of costs to complete. Money paid does not replace either of these figures. AI helps parse documents and explain changes; amounts are calculated by verified rules.
Why budget spent does not show the future result
Comparing the budget with actuals is useful for analysing the past. However, low spending at an interim date can mean either savings or delayed work. If an expensive stage has not yet started, a small amount of cost does not prove the project is doing better than planned.
For each work package, you need the physical remaining quantity, the method of execution, the current price of resources and the timeline. For example, the remaining metres of pipeline require materials, installation hours and testing. If part of the equipment has not been delivered, the completion date and waiting costs are considered separately. The model is a management one and is built for a specific project.
The description of 1C:ERP for Construction Companies (USO) (1C is a widely used Russian business accounting platform) provides for tracking progress and resources, building up cost and adjusting plans. Before development, it is worth checking which of these functions the contractor already has configured and why the manager is not getting the forecast they need.
What parts to build the forecast from
For the first version, the following structure with a single cut-off date can be used:
- Costs actually incurred under the agreed management methodology, including confirmed accruals for work and services received.
- The remaining value of what has been ordered but not yet received or performed, which is not included in actuals.
- An estimate of the uncontracted remaining work at current quantities and prices.
- Separate scenario changes not included in the previous parts.
Warehouse materials need a separate rule: receipt and issue to the works may fall into different accounting stages. The cost engineer determines where they sit in the model. The same material cannot be included in full in actuals and in full in future requirements at the same time. In the cost card, the link to the order, receipt, use and work package is kept.
The construction project budget serves as the baseline for comparison. Its approved version is kept. The current forecast is issued as a separate version so as not to hide an overrun by simply rewriting the plan.
A hypothetical calculation without double counting
All amounts in the example are illustrative, in millions of Russian roubles (RUB), on a comparable basis excluding recoverable VAT. The forecast contract revenue is 20. Costs incurred at the cut-off date are 8. The remaining value of confirmed orders not yet included in actuals is 4. The uncontracted remaining work is estimated at 5.
The cost forecast equals 8 + 4 + 5 = 17. The difference from revenue is 3, or 15% of revenue. This is the margin for the chosen cost composition, before unaccounted overheads, financing and taxes. It does not show money in the bank account.
Out of the 4 million in open orders, an advance of 1 million may already have been paid. It changes future payments but does not reduce the value of the not-yet-performed order to 3 and is not added to the 17 again. Once part of the order is performed, the corresponding amount moves from the remainder into actuals. The related invoice refines the same item; it does not create a new cost.
How to recalculate the remainder when conditions change
Suppose a supplier has confirmed a price increase of 0.4 million for material not yet purchased, and the manager has estimated additional equipment rental at 0.3. If these amounts are not yet in the remainder, the new forecast will be 17.7, and the margin 2.3, or 11.5% of revenue. If the rental is already included in the updated 5 million, it must not be added a second time.
Each change stores its basis: a new offer, a revised quantity, a schedule or a confirmed estimate. The manager sees a bridge from the previous version of the forecast to the new one: which items changed and why. A general “crisis” markup hides the causes; a scenario based on a specific price, timeline or resource is more useful.
Plan-versus-actual in construction becomes part of this picture: it explains deviations that have already occurred, while the updated remainder shows the consequences for completion. The link between the two reports matters more than an extra chart with a percentage complete.
The calculation shows how two small items change the margin. AI helps find the grounds for changes in emails, an employee checks the link to the budget, and the total is calculated by ordinary formulas. Illustrative calculation in millions of RUB: two new items increase the cost forecast from 17 to 17.7, and with revenue of 20, the margin falls from 3 to 2.3.
What to do with additional work
The price claimed from the client and confirmed revenue must be stored separately. Technical approval does not automatically confirm payment. The Autodesk help page on the change order report also separates estimated, submitted and approved amounts. The principle of separating states is useful here; there is no need to adopt someone else's contractual procedure.
If the work requires costs before the final commercial decision, the manager must see them separately and understand the chosen revenue scenario. An unconfirmed proposal does not improve the base margin merely by being sent. For a disputed item, you can show an alternative calculation in which it is accepted, keeping the basis and the author of the assumption.
How to link 1C, spreadsheets and documents
The first product can receive a verified cost export from 1C, remaining quantities from the technical department's spreadsheet and open procurement orders. Each row needs the site, work package, cost item, amount, cut-off date and source. An empty site code must not be automatically assigned to the largest project.
First, the cost engineer reconciles control totals and chooses the rules for allocating shared costs. If exports have different dates, the system shows the discrepancy. Data from EXON (a Russian construction document management system), if the company uses it, can confirm documentation stages, but a document's status alone does not calculate the cost of the remaining work.
For a pilot, one site and a limited set of cost items are enough. Daily automatic synchronisation is not required if management decisions are made on a weekly cut-off. What matters is that the user sees the update date and can open the basis for any amount.
Where AI helps
The assistant is given permitted supplier emails, versions of offers and the project manager's explanations. It extracts a change in price, timeline or quantity, suggests a link to an existing item and shows the source fragment. If the order number is missing or several candidates are found, the link stays unconfirmed.
The cost engineer and the buyer check the draft. After confirmation, ordinary calculation logic recalculates the total. AI can prepare an explanation such as “the margin fell because of two changes” with links to the cards, but it does not invent the cost of unfinished work. The technical feasibility of a postponement or substitution is confirmed by the relevant participant.
A practical technology for extracting fields and tables is described, for example, in Microsoft AI Builder. This is an example of a class of tools. The availability of a specific service, data residency and accuracy on the contractor's documents are checked separately.
How to accept the first version
A project margin forecast should be checked on a closed period where the correct amounts are known. Take one order with an advance and partial performance, one late invoice, one quantity change and one cancelled requirement. In each case, the system must show a single current value and its history.
Then compare the time to prepare a cut-off, the number of unresolved rows and the share of amounts with an available basis. The reduction in reporting effort can be measured right away. Forecasting accuracy is checked over several consecutive cut-offs, without presenting a single match as a proven pattern.
You can start with an anonymised budget for one site and three exports: actuals, open orders and remaining work. From them, we will build a forecast prototype with verifiable amounts and an assistant for analysing changes.
Related reading: Approving additional work: scope, price and the client's decision; A contractor's cash gap: how to link work, completion certificates and payments.
Частые вопросы ### Is it enough to subtract payments from the budget?
No. Payments reflect the movement of money. A cost forecast needs incurred costs and an updated estimate of the remaining work, including services received but not yet paid for.
Can a neural network predict the final cost by itself?
For the first version, a verifiable calculation based on quantities, rates and scenarios is better. AI extracts information and prepares explanations. Assumptions and the final forecast are confirmed by the responsible employees.