When managing a construction project, keeping a close eye on costs is essential. That’s where Cost Value Reconciliation (CVR) comes into play. It helps you monitor and measure actual spending against your budgeted project costs, giving a clear picture of your finances during the project. Let’s break down what CVR means for you and your work as a contractor.
What Is Cost Value Reconciliation (CVR)?
CVR is important for both subcontractors and main contractors to monitor and measure the actual expenditure against the budgeted project expenditure. It tracks how much you’ve spent compared to how much you’ve budgeted. CVR shows the value of your work, including the profit margins, for a clear view of the bottom line.
How Does CVR Work?
CVR is typically calculated alongside your monthly interim valuations and final contract completion. You begin with your first valuation and work your way up to the final contract figure. As you go through it, make sure to communicate any potential changes to the figures with your client.
Costs are going to fluctuate as the project progresses. CVR provides real-time information to the next person in the chain, whether that’s your Project Quantity Surveyor (PQS) or your contractor’s quantity surveyor (QS).
Example:
Let’s say you quoted €50,000 for windows and doors during the tender stage. After going to the market, your client wants to improve the specification, bumping the cost up to €60,000. That’s a €10,000 increase in the contract.
Once the variation notice (VN) and variation order (VO) are agreed on, the CVR will account for this cost increase. It also tracks the monthly increase in the valuation and the overall contract sum. On the flip side, if something like insulation comes in cheaper than expected, that can offset the increase from the windows, keeping your budget in check.
The Full Picture
CVR shows the full picture of the construct sum from day one to final account. It tells the entire story of your project’s financial health, showing how costs evolve and impact the bottom line. It’s you being completely open and honest.
Not everyone does a CVR, but the ones that do, whether they’re small or medium companies, understand the ins and outs of each job. The CVR is essentially a live cost tracker for their construction sites. It’s a proactive approach to managing project finances and helps prevent surprises down the line.
Conclusion
When it comes to managing finances, doing a CVR allows you to keep track of your spending against the budget, communicate changes clearly, and provide a real-time financial snapshot of your project.
It’s a way to stay transparent, trustworthy and successful on site and with your clients. If you need support on site, contact us today at Carroll Estimating to learn how our team of professional QS and Estimators can help you set up a successful site with a seamless process from tender bid to final account.