Presenting construction cost to a board, and making the number hold

Presenting construction cost to a board fails in three predictable ways: a single number with no range, a contingency figure nobody can source, and a movement with no named cause. Each one is fixable on the page before the meeting rather than in the room during it.

What the board is actually asking

A board is not trying to understand construction. It is trying to establish three things: whether the number is likely to hold, what happens if it does not, and whether the person presenting it knows which of the two they are describing.

That is why a confident single figure performs worse than an honest range. A single figure invites one question, which is whether it is right, and there is no good answer to that question in a board meeting. A range invites a different question, which is what moves it, and that one you can answer.

The second thing a board is doing is calibrating you. Somebody in the room has sat through a presentation where a number held all the way to month eighteen and then moved nine percent in a quarter. They are listening for whether this presentation sounds like that one.

A presentation that names its own weak points sounds different from one that does not, and the difference is not tone. It is whether the weak points are on the slide.

The third thing, and the one that decides whether you are asked back, is whether the figures can be traced. A number nobody can source is a number the board has to take on the presenter authority, and boards are constituted precisely to avoid doing that.

The three ways presenting construction cost to a board goes wrong

One. A point estimate with no range. The cost of a project under construction is not a number, it is a distribution, and everybody in the room knows that even if nobody says it. Presenting $64.2 million reads as precision that cannot exist. Presenting $64.2 million with an open exposure of $1.4 million to $3.6 million reads as a person who has done the arithmetic.

Two. A contingency figure with no source. Contingency presented as a percentage is a rule of thumb. Contingency presented as a fund with a named holder, a permitted use and a list of the demands already visible against it is a position. If the board asks what the 4 percent is based on and the answer is that 4 percent is typical, the number has no defense.

Three. A movement with no named cause. When cost moves between meetings, the movement has to be attributable, line by line, to a cause with a name: an owner directed change, a design development item, an allowance landing above the figure carried, an unforeseen condition. A movement described as construction cost increases is not a report, it is a summary of one.

All three failures share a root. They present a conclusion without the working, and a board that cannot see the working has no way to agree with it except by trusting you, which it will do once and not twice.

What to put on the page instead

Four items, and they fit on one page.

The committed number and the open number, separately. What is under contract and what is still an estimate. A guaranteed maximum price with 40 percent of the work unbought is a different object from the same price with 85 percent awarded, and the board should be told which one it is looking at.

The two contingency funds on separate lines, each with the controlling party named. Never a combined figure. The reasoning sits in contractor contingency and owner contingency and it is the fastest way to lose a board room argument you should have won.

The open exposure as a range, built from the allowance schedule, the exclusions and the unbought packages, with the three largest items named. Not a percentage. A list.

The movement since the last meeting, attributed by cause, with the running total for each cause since the start. A board that can see that owner directed changes account for 60 percent of movement has learned something actionable about its own behavior, which is usually the most useful thing in the pack.

A worked example

A $71 million project reporting quarterly. At the March meeting the cost is presented as $71 million with 4 percent contingency and no further comment.

At the June meeting cost is $73.8 million. The board asks what happened. The answer available in the room is that there have been a number of change orders.

The same June meeting, prepared differently. Committed $58 million, open $15.8 million. Movement since March $2.8 million, of which owner directed changes $1.7 million across eleven items, allowance overages $740,000 across three items, and unforeseen conditions $360,000 on one. Owner contingency remaining $1.9 million against a remaining open exposure of $1.4 million to $3.1 million.

Same project, same numbers, same bad quarter. The first version produces a discussion about the contractor. The second produces a discussion about whether the board wants to keep approving lobby changes, which is the conversation that actually saves money.

The quarter where it gets difficult

Every job has one meeting where the number moves and the cause is not flattering. That meeting decides how the rest of the project is governed.

The instinct is to soften it: present the movement net of a saving elsewhere, describe an allowance overage as a design development item, or hold a known exposure back until the next quarter on the reasoning that it may resolve. All three are understandable and all three are expensive, because a board that later discovers a softened number discounts every number that follows it.

The alternative is to present the bad quarter with the same structure as the good ones. Committed and open. Movement by cause. Remaining fund against remaining exposure. The structure does the work of the tone, and a consistent format is read as candor in a way that a paragraph of explanation is not.

The second discipline is to bring the decision with the news. A board told that the number moved $2.8 million will ask what you are doing about it. A board told the same thing alongside a recommendation to close the lobby scope, tighten the change approval threshold and cap two remaining allowances has something to vote on.

Where the movement is driven by scope the owner itself directed, say so plainly and show the running total. That is not a criticism of the client, it is the single piece of information most likely to change the client behavior, and it belongs with the people who carry the number.

What to do before the meeting

1. Split the cost into committed and open, and state the buyout percentage as a number.
2. Show the two contingency funds on separate lines with the controlling party named in each label.
3. Build the open exposure as a range from the allowance schedule, the exclusions and the unbought packages.
4. Name the three largest open items and what each is worth if it lands badly.
5. Attribute every dollar of movement since the last meeting to a named cause.
6. Carry a running total by cause since the start of the job, not just the quarter.
7. Put the source document and page behind every figure in an appendix nobody will read and everybody will notice.

Item seven is the cheapest credibility on the list. It is never opened and it changes how the rest of the pack is received, because a presenter who has prepared to be checked is presenting differently from one who has not.

What we do

We produce the open exposure range and the register behind it, sourced line by line to the contract documents, in a form that goes into a board pack without rewriting. We do not present it for you and we do not sit in the meeting. The document is addressed to the owner and written to be checked, which is the only property that matters once it leaves your hands. The underlying reading is the readiness review.

Questions people ask