The anticipated final cost line, built from provisional sums, agreed and pending variations, claims and open risk, and why a report of agreed changes reads low.
Anticipated final cost is the contract sum, less provisional sums omitted, plus what is being spent against them, plus agreed variations, plus pending variations and claims at the cost manager's assessed value, plus anticipated changes and the risk still open. On an illustrative 26,301,102 contract that gives 28,943,902, a movement of 10.0 per cent and 1,327,745 over a budget with 5 per cent contingency, while a report of agreed changes alone shows 458,755 of headroom.
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The anticipated final cost, or AFC, is the line a client, funder and board actually read in a monthly cost report: what will this contract cost when the final account is settled? It is a forecast, not a ledger. A report that totals only what has been agreed is a record of the past and almost always reads low, because variations and claims are agreed months after they arise.
| Line | Contractor's figure | Cost manager's assessment |
|---|---|---|
| Contract sum | 26,301,102 | 26,301,102 |
| Provisional sums in the contract, omitted | −1,340,000 | −1,340,000 |
| Instructed expenditure against provisional sums | 1,512,000 | 1,512,000 |
| Agreed variations, 23 instructions | 684,300 | 684,300 |
| Instructed variations not yet agreed | 912,000 | 641,500 |
| Anticipated variations, not yet instructed | 385,000 | |
| Loss and expense claim | 1,150,000 | 310,000 |
| Risk allowance still open | 450,000 |
The client's approved budget is the contract sum plus 5 per cent contingency, 1,315,055, so 27,616,157. All figures are illustrative.
Provisional sums are placeholders in the contract sum. Once the work is instructed, the allowance is omitted in full and the instructed value added in its place: 1,512,000 − 1,340,000 = 172,000 net. Showing the expenditure without the omission double counts it, a mistake set out in how provisional sums are adjusted in the final account.
AFC = contract sum − PS omitted + PS expenditure + agreed variations + pending variations + anticipated variations + claims + risk
= 26,301,102 − 1,340,000 + 1,512,000 + 684,300 + 641,500 + 385,000 + 310,000 + 450,000 = 28,943,902
Excel, with each line in column C of the report: =SUM(C2:C9), omissions entered as negatives so that the total is a single sum.
Pending variations and the claim go in at the cost manager's assessment, not the contractor's figure and not zero. The assessment is the honest central estimate: the contractor's figures are an opening position, and zero pretends the instruction was never given. Anticipated variations are changes the client team knows are coming, a design change under discussion or an early warning, priced before anyone has instructed them. The risk allowance is the residual of the priced register, as built in how to calculate construction contingency.
| Reading | Forecast | Movement | Against budget |
|---|---|---|---|
| Agreed changes only | 27,157,402 | 856,300 | 458,755 under |
| Anticipated final cost, assessed | 28,943,902 | 2,642,800 | 1,327,745 over |
| Contractor's figures accepted in full | 30,054,402 | 3,753,300 | 2,438,245 over |
The AFC moves the contract by 10.0 per cent and uses 201.0 per cent of the contingency. The report of agreed changes only understates it by 1,786,500 and tells the board the project is inside its budget. The gap between the cost manager and the contractor, 1,110,500, is mostly the claim: 840,000 of it against 270,500 on the pending variations. That is where commercial effort should go.
| Pending variations settle at | Claim at 310,000 | Claim at 575,000 | Claim at 1,150,000 |
|---|---|---|---|
| Assessment, 641,500 | 28,943,902 (−1,327,745) | 29,208,902 (−1,592,745) | 29,783,902 (−2,167,745) |
| Midpoint, 776,750 | 29,079,152 (−1,462,995) | 29,344,152 (−1,727,995) | 29,919,152 (−2,302,995) |
| Contractor, 912,000 | 29,214,402 (−1,598,245) | 29,479,402 (−1,863,245) | 30,054,402 (−2,438,245) |
Even if the risk allowance were released untouched, the AFC would be 28,493,902 and still 877,745 over. No settlement in the table brings the project inside budget, which is the message the report must carry now, at month 12, not at the final account. The AFC overruns the budget by 4.8 per cent on the cost manager's own figures.
The AFC is a forecast of the final account, built from every known change at its assessed value plus the open risk. Here it is 28,943,902, 10.0 per cent above the contract and 1,327,745 over budget, while the agreed changes alone suggest 458,755 of room. Construction Cost Control carries a contract from its sum to the final account line by line, and the free workbooks for this case include the bridge that splits the movement into what was bought, what was lost and what was recovered.
Committed cost counts only what has been agreed; anticipated final cost adds pending and anticipated variations, claims at assessed value and open risk. On the illustrative contract committed cost is 27,157,402 and the AFC 28,943,902, a difference of 1,786,500 that turns 458,755 of apparent headroom into a 1,327,745 overrun.
Yes, at the cost manager's assessed value, with the contractor's figure shown beside it as the range. In the illustrative report a loss and expense claim of 1,150,000 is assessed at 310,000. Leaving it out understates the forecast; accepting it in full adds 840,000 and takes the AFC to 30,054,402 with the pending variations at the contractor's figures too.
No. Contingency is budget, not cost, and the AFC is compared with it. In the illustrative case the 5 per cent contingency of 1,315,055 is already exceeded: the movement of 2,642,800 uses 201.0 per cent of it. Only the risk allowance inside the AFC, 450,000 here, is a forecast cost that may or may not be spent.
This article is one calculation from Construction Cost Control. The book takes the same case from first principles to the decision, chapter by chapter, and every figure it prints is a live formula in the free companion workbooks.
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