Cost management in construction is the whole loop a small contractor runs from the estimate to the last draw: the estimate set as the budget, the subcontracts and purchases committed against its lines, the spend tracked as the invoices arrive, the draws billed against the schedule of values, and the margin read at each application as the difference between what has been billed and what has been spent. The phrase is searched under several names, cost management of construction projects, construction project cost management, and the answer is the same loop; construction budget management software is the record that holds it. This page works the loop on the hub's $449,075 example and points at the free estimator and draw on this site that do its arithmetic, with no account.
The budget is the estimate, line by line
Cost management starts by treating the estimate as the budget rather than as a number to beat: on the hub's example, $330,000 of building at the contractor's own cost per square foot, $25,000 of site work, $35,500 of contingency at 10% and $58,575 of overhead and profit at 15%, $449,075 in all, with the building broken into the trades the schedule of values will carry. Each trade line is a budget the subcontract has to fit, and a subcontract that does not fit is the first management decision, made before the sub starts. The free construction cost estimator on this site produces those lines from the contractor's own figures; the Small Business Administration's finance guide is the plain-language reference for the overhead the markup has to cover.
Commitments and spend against the lines
As subcontracts are signed and materials ordered, each is committed against a line, and as invoices are paid each is spent against it, so that at any date a line reads estimate, committed, spent and left. The management is in the committed column: a line whose commitments exceed its estimate has overrun before the work starts, and the contingency exists to absorb that on some lines and not on all of them. On the example, $35,500 of contingency covers a $12,000 framing overrun and leaves $23,500 for the rest of the job, which is a figure to know in month two rather than month nine.
Draws and the margin at every application
Each draw bills the share complete of each line to the owner with retainage held, and each sub's draw is spend against the same line, so the margin on the job at any date is what has been billed less what has been spent, adjusted for the retainage held on both sides. On the example's first draw, 35% complete with 20% billed before, $12,000 stored and 10% retainage, $71,550 is due to the contractor; against it sit the subs' applications for the same period. The construction project billing software guide on this site says what the record must keep for the draws; construction project cost management is reading the margin from that record at every one of them, not from the bank balance at the end.
What construction budget management software has to hold
The estimate with its lines and its contingency; the schedule of values mapped to those lines; every subcontract and purchase order committed against them; every invoice paid; every draw billed to the owner and every sub's draw paid, with retainage on both; and the change orders that moved the sum, so that the budget is the current contract and not the original one. One project, one record, exported when the owner or the accountant asks. The free tools on this site do the estimate's and the draw's arithmetic; the paid plan is that record, at one price for the contractor rather than per user.
Questions people ask about cost management in construction
What is cost management in construction for a small contractor?
The loop from the estimate to the last draw: the estimate as the budget per line, subcontracts and purchases committed against the lines, spend tracked as invoices are paid, draws billed against the schedule of values, and the margin read at every application.
Where does contingency fit in cost management?
As the budget for overruns on some lines: on a $449,075 job with $35,500 of contingency, a $12,000 framing overrun in month two leaves $23,500 for the rest. Knowing that early is the management.
What should construction budget management software hold?
The estimate and its lines, the schedule of values mapped to them, commitments, invoices, the owner's draws and the subs' draws with retainage, and the change orders, as one record per project that exports.