The Estimate vs. The Budget
A common mistake is assuming the Estimate is the Budget. It isn't.
- The Estimate: The price you sold the project for (Revenue). It includes margins, buffers, and averaged rates.
- The Budget: The target cost you intend to build it for (Cost). It matches your actual procurement strategy (e.g., splitting a carpentry package into Labour and Material orders).
Cost Planning is the process of converting the Estimate into a workable Budget (Trade Breakdown) before work begins. This "buy-out" phase is where 80% of project profit is won or lost.
What a “Buildable Budget” Looks Like
A buildable budget is not a single lump sum per trade. It is aligned to how you will actually buy and deliver the job.
- Scope aligned: each budget line has a clear inclusion list and boundaries (what’s excluded).
- Cost-coded: your cost codes match reporting, forecasting, and variation valuation.
- Procurement-ready: you can issue RFQs / POs without re-inventing scope every time.
Buy-Out Sequence (Practical)
- Confirm scope stability: drawings, specs, schedules, and client selections (or a written allowance process).
- Package the work: separate supply-only, labour-only, and supply+install where it suits your delivery model.
- RFQ with rules: same inclusions list to all tenderers; enforce a consistent return format.
- Level the quotes: normalise exclusions, provisional items, and assumptions before comparing numbers.
- Award and lock: confirm price, lead times, and change rules; document it (even if it’s “just” a PO).
Allowances, Provisional Sums, and Contingency
Allowances are fine—hidden allowances are how margins disappear. Put uncertainty into explicit buckets:
- Client selections: PC/PS/selection allowances with a written upgrade process.
- Unclear scope: defined provisional sums with triggers to firm them up.
- Builder risk: contingency that is tracked and only released with approval.
Handover: Estimating → Delivery
The best cost plans include a handover pack: assumptions, exclusions, key risks, supplier quotes, lead times, and a change-control approach. This is how you prevent the classic problem of the site team inheriting a number without the reasoning behind it.