Cost to complete: how to collect honest estimates from your PMs

Cost to complete, sometimes called estimated cost to complete or CTC, is the project manager's estimate of how much more a job will cost to finish, as of the period end. It is the one number on a work-in-progress schedule that does not come from the books, and it drives most of the others. If it is stale or optimistic, percent complete, earned revenue, over or under billing and the job's expected profit are all wrong together.

This guide covers what the estimate should include, why it matters so much, and how to collect it from project managers every month without chasing them for a week.

Why it drives the whole schedule

On a schedule that measures progress by cost:

• Estimated total cost = cost to date + cost to complete
• Percent complete = cost to date / estimated total cost
• Earned revenue = percent complete x contract amount

Take an example job with a $3,050,000 contract and $875,000 of cost to date. With a cost to complete of $1,625,000, it is 35% complete and has earned $1,067,500. If the project manager underestimates by $300,000 and says $1,325,000, the job shows as about 39.8% complete with about $1,213,000 earned, roughly $146,000 more revenue and profit this period than it should, and the job will give that back later. That later give-back is the profit fade sureties look for.

The underbillings guide shows how the same error turns into an underbilling that may never be billed.

What a good estimate includes

Cost to complete is everything the job will still cost from the period end, not what is left in the budget. A useful definition to give project managers:

Cost to complete is what you expect the job still to cost from here, including committed subcontracts and materials not yet billed.

In practice that means:

• Remaining subcontract value, including approved changes, less what subs have billed so far.
• Committed materials not yet invoiced, and materials still to buy.
• Remaining labor, at what it is actually costing, not the bid rate.
• Equipment, general conditions and supervision to the end of the job.
• Known problems: rework, claims you expect to lose, delays that add general conditions.
• Costs for approved change orders that are in the contract amount.

And what it leaves out: profit, overhead that is not charged to jobs, and costs already recorded in cost to date. Counting a sub's invoice in both cost to date and cost to complete is a common error when the invoice was entered after the PM last looked.

Budget-based versus estimated

Some companies calculate cost to complete as the original budget minus cost to date. It is quick, and it is only right when the job is exactly on budget. It also hides overruns until the budget runs out, at which point the job's profit drops in one month. Most sureties expect the estimate to come from the person running the job, reviewed each period. If you start from the budget, have the project manager confirm or change it.

Collecting it every month

The bottleneck is rarely the math. It is getting answers from busy project managers by the date you need them. A routine that works:

1. Send it as soon as the books close. Each project manager gets one message with only their jobs.
2. Give them context. For each job, include cost to date and last month's estimate, so they are updating a number rather than inventing one.
3. Ask for a note on big moves. If an estimate changes by more than a set percentage, ask for one line on why.
4. Set a deadline and remind. A short reminder each morning until the estimate is in works better than one stern email.
5. Review before you use it. Compare with last month and look closely at any job where percent complete went down or the estimated total moved sharply.
6. Escalate the last one by phone. By the third day, a call from the controller usually settles it.

A request email that tends to get answered:

Subject: Cost to complete for September, 3 jobs

Hi Marcus,

I'm putting together the September WIP schedule. Please send cost to
complete for each of your jobs by Thursday:

- 2211 Warehouse addition: cost to date $875,000; last month's
  estimate to complete $1,710,000
- ...

Cost to complete is what you expect the job still to cost from here,
including committed subcontracts and materials not yet billed. A line
of explanation on anything that moved a lot helps.

Thanks,
Dana

When an estimate does not come in

Decide your policy before the deadline, and apply it the same way every month:

• Carry last month's estimate forward less this month's cost. It is better than a blank, which reads as zero and makes the job look finished. Mark it as carried forward.
• Enter your own estimate and note that it is yours.
• Hold the schedule for a day if the job is large enough to change the picture.

Whatever you do, note it on the schedule. A reader who later sees the number change should be able to see why.

Reviewing what comes back

Things to question before the schedule goes out:

• Percent complete went down. Cost to date only rises, so a drop means the estimate went up by more than the month's spend. Ask what changed.
• The estimate dropped as much as the month's cost. The PM may have subtracted this month's spend from last month's estimate without looking at the job.
• Negative cost to complete. A typing error, almost always.
• A projected loss. If estimated total cost exceeds the contract amount, the full expected loss is normally recognized now. Flag it for your CPA and the owner.

For the rest of the monthly routine, see what a WIP schedule is and how to build one.

How WIP Monthly collects it

WIP Monthly sends the request for you. When you click "Request estimates", each project manager gets one email listing their jobs, with cost to date and last month's estimate, and a link to enter cost to complete with an optional note. They need no account. Anyone who has not answered gets a reminder each weekday at 9am in your time zone, up to five, and you get a note on the third day (or the next weekday after it) listing who is still outstanding. The period page shows who has been asked, who opened the link and who submitted. You can enter or override any estimate yourself, and the schedule flags missing estimates, percent complete going down and estimates that moved more than 10% from last month. A job still without an estimate when you finalize goes on the PDF and Excel file as "No estimate", 0% complete with nothing earned, never as a blank that reads as zero.