Prepare the Budget
Open the project from the contract and proposal estimate (ONS). Build the operative budget keeping the project margin unchanged, and schedule costs, revenues and invoicing — the Project Revenue Schedule (PRS).
Procedure · Live Project Data
Cost Control,
Margin Under Control
A disciplined monthly procedure that links forecast-to-complete with the accounting system — turning raw site and invoice data into a reliable, real-time view of cost, revenue and margin. Proven on real EPC programmes.
The Procedure
Four Stages,
One Cycle
From the opening of the project to the monthly cost report — a closed loop that keeps the project margin visible at every step.
Actualize Costs
Each month, collect actual man-hours, physical progress, materials and invoices. Update engineering, material and construction costs, and active billing — actual vs budget, month by month.
Commitment & Forecast
Compute committed costs (issued orders, spent man-hours) and the estimate-to-complete. Expected total cost = commitment + estimate-to-complete — the forecast that drives decisions.
Reporting & Indicators
Issue cost control reports with summary charts and indicators: gross profit, margin percentage and work-in-progress (WIP). Revenues, costs, margin and invoicing — at a glance.
The Monthly Cycle
A Rhythm That
Never Slips
A cycle well organised allows a cost control report updated in real time, with a reliable forecast for the following month.
Day 7
Collect Inputs
Internal/external man-hours (ADM/PM), updated engineering plan, quantities and direct man-hours (CM), procurement orders & deliveries.
Analyse
Update & Reconcile
Update costs of direct and indirect resources, physical progress, equivalent construction progress and efficiency / efficacy analysis.
Day 15
Economic Situation
Administration sends the provisional economic situation, recorded and analysed by Cost Control with the PM — actions agreed before release.
Real Time
Issue Report
A cost control report updated in real time, with a reliable forecast for the following month and early warning on margin.
The Engine · Cost Equations
Every Number
Has a Formula
Cost control is not opinion — it is arithmetic applied with discipline. These are the equations behind every Salerno cost report.
ACT
Actual Cost
Engineering = accounting man-hours × updated rate · Materials = invoices received · Construction = work-progress income (monthly).
CMT
Commitment Cost
Engineering & commissioning = spent man-hours × updated rate · Materials = updated cost of issued orders · Subcontract = % physical progress × total subcontract (monthly & accumulated).
FCT
Forecast Cost
Estimate-to-complete = orders to be issued · Total expected = commitment + to-be-committed · Expected total cost = commitment + estimate-to-complete.
Elements & Indicators for Cost Control
Revenue
= (cost accumulated to date ÷ estimated total cost)
× estimated total revenue
× estimated total revenue
Gross Profit monthly & accumulated
Actual = revenues to date − costs to date
Estimated = estimated revenues − estimated costs
Estimated = estimated revenues − estimated costs
Margin %
Actual = (accum. revenue − accum. cost) ÷ accum. revenue
Estimated = (total rev. − total cost) ÷ total revenue
Estimated = (total rev. − total cost) ÷ total revenue
WIP — Work In Progress
= revenue − invoiced
Positive when invoiced is less than already expended
Positive when invoiced is less than already expended
Live Project Data · Hydroelectric Plant · 2003
Budget · Actual · Forecast
· Earned
A real cost control engagement on a hydroelectric plant programme. The man-hours S-curve tells the whole story at a glance: planned (budget), spent (actual), value delivered (earned) and the projection to completion (forecast) — time now, 30 April. In earned-value terms: Budget = BCWS, Actual = ACWP, Earned = BCWP — the same indices that drive SPI and CPI.
6,400
Budget Man-hours (BAC)
3,600
Actual · ACWP @ 30 Apr
0.62
SPI · Schedule Index
1.10
CPI · Cost Index
The reading a project manager wants: behind plan (SPI 0.62) but cost-efficient (CPI 1.10) — more value earned per hour than planned. The forecast recovers to budget by June, and every figure reconciles back to the accounting system, not a spreadsheet in isolation.
Live Project Data · Residential Complex · 2004
The Bottom Line
Is the Margin
The same procedure on a residential complex — the project Salerno also modelled in 4D. Cost control reconciled revenue, cost and gross margin month by month, holding the project margin steady to handover.
Economic Summary · Update 01 Sep
Revenue
3,300,000
Cost
2,800,094
Gross Margin (M.L.)
499,906
Margin %
15.15%
Illustrative figures · residential complex cost control
Live Project Data · Cash Flow
Revenue, Cost &
the Cash Position
Cost control doesn't stop at margin — it projects the cash. Cumulative curves for revenue, cost, receipts (cash in) and disbursements (cash out) reveal the financing need across the whole project life, with 90-day payment terms.
The gap between receipts and disbursements is the cash the project must finance. Knowing it months ahead is the difference between a funded project and a stalled one — and it ties directly to WIP (revenue − invoiced).