Cost Control Procedures

Document Type: Procedure
Version: 1.0
Last Updated: February 2026
Distribute To: CFO, Controller, Project Managers, Superintendents

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Purpose

Establish procedures for controlling costs at both the project and company level to protect margins, identify issues early, and drive profitability.

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Why Cost Control Matters

Construction Margin Reality:

• Typical net margins: 2-5%
• Small cost overruns eliminate profit
• Cost control = profit protection
• Once spent, money is gone

Benefits of Cost Control:

• Protect project margins
• Early problem identification
• Accountability
• Better future estimates
• Competitive advantage

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Cost Control Framework

Three Levels of Control:

Level	Focus	Frequency	Owner
Project	Job cost by cost code	Weekly	PM
Company	Total direct costs	Monthly	CFO
Overhead	Administrative expenses	Monthly	Controller

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Project Cost Control

Weekly Cost Review:

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         WEEKLY PROJECT COST REVIEW
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Project: _______________________  PM: _______________________
Week Ending: _______________

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COST STATUS:

| Category | Budget | Committed | Actual | Available |
|----------|--------|-----------|--------|-----------|
| Labor | | | | |
| Materials | | | | |
| Subcontractors | | | | |
| Equipment | | | | |
| Other | | | | |
| TOTAL | | | | |

% of budget spent: _____%
% of work complete: _____%
Cost Performance Index: _____ (Budget ÷ Actual for work complete)
  over 1.0 = Under budget
  under 1.0 = Over budget

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SIGNIFICANT VARIANCES (over 5%):

| Cost Code | Issue | Cause | Action |
|-----------|-------|-------|--------|
|           |       |       |        |

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COMMITTED COSTS NOT YET BILLED:

| Item | Vendor/Sub | Amount | Expected Invoice |
|------|------------|--------|------------------|
|      |            |        |                  |

Total committed: $_________________

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CHANGE ORDERS PENDING:

| CO # | Description | Amount | Status |
|------|-------------|--------|--------|
|      |             |        |        |

Total pending COs: $_________________
Recovery potential: $_________________ (____% of overruns)

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WEEKLY ACTIONS:

☐ Cost report reviewed with team
☐ Variances explained
☐ Corrective actions assigned
☐ Change orders submitted
☐ Forecast updated

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Cost Code Monitoring:

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         COST CODE DETAIL REPORT
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Project: _______________________
Cost Code: _______________________  Description: _______________

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| Item | Budget | Actual | Committed | Available | Variance |
|------|--------|--------|-----------|-----------|----------|
| Labor | | | | | |
| Material | | | | | |
| Sub | | | | | |
| Equipment | | | | | |
| TOTAL | | | | | |

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VARIANCE ANALYSIS:

Variance amount: $_________________
Variance %: _____%

Cause:
☐ Quantity (more/less work than estimated)
☐ Rate (higher/lower cost than estimated)
☐ Scope change (CO pending/approved)
☐ Productivity (better/worse than planned)
☐ Estimating error
☐ Other: _______________________________

Detail:
___________________________________________________________

Action plan:
___________________________________________________________

Recovery plan:
___________________________________________________________

Responsibility: _______________________  Due: _______________

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Labor Cost Control

Daily Labor Tracking:

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         DAILY LABOR REPORT
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Project: _______________________  Date: _______________
Superintendent: _______________________

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CREW:

| Employee | Class | Hours | Cost Code | Activity |
|----------|-------|-------|-----------|----------|
|          |       |       |           |          |
|          |       |       |           |          |

Total hours: _____
Total labor cost: $_________________

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PRODUCTION:

| Activity | Units Planned | Units Complete | % |
|----------|---------------|----------------|---|
|          |               |                |   |

Productivity: _____ units/hour (Target: _____)

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ISSUES AFFECTING PRODUCTIVITY:

☐ Weather
☐ Material delays
☐ Equipment issues
☐ Design problems
☐ Other trades
☐ None

Detail: ___________________________________________________________

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Labor Productivity Analysis:

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         LABOR PRODUCTIVITY REPORT
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Project: _______________________  Period: _______________

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| Cost Code | Budget Hrs | Actual Hrs | Variance | Productivity |
|-----------|------------|------------|----------|--------------|
|           |            |            |          |              |
|           |            |            |          |              |
| TOTAL     |            |            |          |              |

Overall productivity factor: _____
  (Budget hours for work complete ÷ Actual hours)

Productivity trend:
  Week 1: _____
  Week 2: _____
  Week 3: _____
  Week 4: _____

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PRODUCTIVITY IMPROVEMENT ACTIONS:

| Issue | Action | Owner | Status |
|-------|--------|-------|--------|
|       |        |       |        |

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Material Cost Control

Purchase Order Control:

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         PURCHASE ORDER APPROVAL
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PO #: _______________  Date: _______________
Project: _______________________
Vendor: _______________________

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ITEMS:

| Description | Qty | Unit Price | Total | Cost Code |
|-------------|-----|------------|-------|-----------|
|             |     |            |       |           |
|             |     |            |       |           |
| TOTAL       |     |            |       |           |

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BUDGET CHECK:

Cost code budget: $_________________
Already committed: $_________________
This PO: $_________________
Remaining after: $_________________

Status: ☐ Within budget  ☐ Over budget (approval required)

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APPROVAL:

☐ Under $5,000: PM approval
☐ $5,000-$25,000: PM + Controller
☐ Over $25,000: PM + Controller + CFO/Owner

Approved by: _______________________  Date: _______________

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Material Waste Tracking:

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         MATERIAL WASTE REPORT
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Project: _______________________  Month: _______________

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| Material | Ordered | Used | Waste | Waste % | $ Value |
|----------|---------|------|-------|---------|---------|
|          |         |      |       |         |         |
|          |         |      |       |         |         |
| TOTAL    |         |      |       |         |         |

Target waste %: _____%
Actual waste %: _____%

Waste cost this period: $_________________
YTD waste cost: $_________________

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WASTE CAUSES:

| Cause | Amount | % of Total |
|-------|--------|------------|
| Damage | | |
| Theft | | |
| Over-ordering | | |
| Cutting/scrap | | |
| Defects | | |
| Other | | |

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CORRECTIVE ACTIONS:

| Issue | Action | Owner |
|-------|--------|-------|
|       |        |       |

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Subcontractor Cost Control

Subcontract Management:

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         SUBCONTRACT STATUS REPORT
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Project: _______________________

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| Subcontractor | Original | Changes | Current | Billed | Remaining |
|---------------|----------|---------|---------|--------|-----------|
|               |          |         |         |        |           |
|               |          |         |         |        |           |
| TOTAL         |          |         |         |        |           |

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CHANGE ORDERS:

| Sub | CO # | Description | Amount | Status |
|-----|------|-------------|--------|--------|
|     |      |             |        |        |

Total approved sub COs: $_________________
Total pending sub COs: $_________________

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BACK CHARGES:

| Sub | Issue | Amount | Status |
|-----|-------|--------|--------|
|     |       |        |        |

Total back charges: $_________________

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ISSUES:

| Sub | Issue | Impact | Resolution |
|-----|-------|--------|------------|
|     |       |        |            |

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Equipment Cost Control

Equipment Utilization:

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         EQUIPMENT COST REPORT
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Project: _______________________  Period: _______________

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OWNED EQUIPMENT:

| Equipment | Days on Site | Daily Rate | Total | Budget | Var |
|-----------|--------------|------------|-------|--------|-----|
|           |              |            |       |        |     |

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RENTED EQUIPMENT:

| Equipment | Vendor | Period | Cost | Budget | Var |
|-----------|--------|--------|------|--------|-----|
|           |        |        |      |        |     |

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TOTAL EQUIPMENT COST:

Budget: $_________________
Actual: $_________________
Variance: $_________________

Utilization check:
☐ All equipment being used productively
☐ Equipment returned when not needed
☐ No idle equipment on site

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Overhead Cost Control

Monthly Overhead Review:

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         MONTHLY OVERHEAD REVIEW
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Month: _______________

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| Category | Budget | Actual | Variance | % | YTD Var |
|----------|--------|--------|----------|---|---------|
| Salaries | | | | | |
| Benefits | | | | | |
| Rent | | | | | |
| Utilities | | | | | |
| Insurance | | | | | |
| Professional | | | | | |
| Technology | | | | | |
| Marketing | | | | | |
| Travel | | | | | |
| Other | | | | | |
| TOTAL | | | | | |

Overhead as % of revenue:
  Budget: _____%
  Actual: _____%

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SIGNIFICANT VARIANCES:

| Item | Variance | Cause | Action |
|------|----------|-------|--------|
|      |          |       |        |

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OVERHEAD EFFICIENCY:

Revenue per overhead dollar:
  Budget: $_____
  Actual: $_____

Assessment: ☐ Efficient  ☐ On target  ☐ Inefficient

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Cost Control Meetings

Weekly Project Cost Meeting:

Attendees: PM, Superintendent, Controller Duration: 30 minutes per project

Agenda:

1. Cost report review (5 min)
2. Variance discussion (10 min)
3. Change order status (5 min)
4. Forecast update (5 min)
5. Action items (5 min)

Monthly Cost Review Meeting:

Attendees: Owner/CEO, CFO, PMs Duration: 1-2 hours

Agenda:

1. Company financial review
2. Project portfolio summary
3. Major variances
4. Overhead review
5. Forecast adjustments
6. Strategic issues

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Cost Control Tools

Earned Value Analysis:

Planned Value (PV) = Budgeted cost of work scheduled
Earned Value (EV) = Budgeted cost of work performed
Actual Cost (AC) = Actual cost of work performed

Cost Variance (CV) = EV - AC
  Positive = Under budget
  Negative = Over budget

Cost Performance Index (CPI) = EV ÷ AC
  over 1.0 = Under budget
  under 1.0 = Over budget

Estimate at Completion (EAC) = Budget ÷ CPI

Example:

Budget: $1,000,000
Work 50% complete
Should have spent (PV): $500,000
Budgeted cost for work done (EV): $500,000
Actually spent (AC): $550,000

CV = $500,000 - $550,000 = -$50,000 (over budget)
CPI = $500,000 ÷ $550,000 = 0.91 (91 cents value per dollar spent)
EAC = $1,000,000 ÷ 0.91 = $1,099,000 (projected final cost)

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Corrective Action Process

When Overruns Identified:

1. Quantify - How much? How serious?
2. Analyze - Why did this happen?
3. Options - What can we do?
4. Decide - Which action to take?
5. Execute - Implement the action
6. Monitor - Track results

Corrective Action Options:

Option	Description	When to Use
Value engineering	Find cheaper way	Early in project
Acceleration	Work faster	Schedule-driven
Re-sequence	Change work order	Efficiency gain
Change order	Bill owner	Scope change
Accept	Absorb cost	Minor, unavoidable
Offset	Savings elsewhere	Balance portfolio

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Related Documents

• Job Costing Procedures
• Variance Analysis
• Budget Preparation
• Change Order Management

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Template provided by support.construction. Control costs or they will control you.