Cost Plan Reconciliation

Section 1

Purpose

Cost Plan Reconciliation is the formal analytical process of tracing the movement from the original approved project budget (Formal Cost Plan 1 at RIBA Stage 2 or the Employer's Requirements Budget) through successive cost plans, tender returns, contract sum, and post-contract adjustments to the agreed Final Account. It is the definitive account of how and why the project cost changed from inception to close-out, and forms the core analytical content of the Final Cost Report to the client.

The reconciliation has two purposes: (i) client accountability — demonstrating to the client where their budget was spent, where it was saved, and why the final outturn differed from the original approved estimate; and (ii) professional knowledge — building the QS firm's understanding of which elements, project types, or procurement routes are prone to cost growth, so that future estimates are more accurate.

RICS Cost Analysis and Benchmarking (2nd ed., August 2024) requires the reconciliation to be structured using the BCIS elemental format so that the project's cost data can be compared with BCIS benchmarks and submitted to the BCIS cost database.

Section 2

Key Principles

RICS Cost Analysis and Benchmarking (2nd ed., August 2024): the Cost Plan Reconciliation should be structured using the SFCA (Standard Form of Cost Analysis) elemental breakdown; cost/m² GIFA should be calculated for each element and compared to BCIS benchmarks.
RICS Project Financial Control and Reporting: the reconciliation must explain variances between each stage of cost reporting — from Cost Plan 1 (RIBA Stage 2) through to Final Account — identifying design change, scope change, market conditions, and risk events as drivers.
NRM1 (RICS New Rules of Measurement, Order of Cost Estimating, 2nd ed.): provides the elemental cost breakdown structure that underpins the reconciliation; the 12 main elements (substructure, superstructure, etc.) are the standard framework.
RICS Cost Prediction PS (effective 1 January 2020): requires the QS to be able to account for all risk allowances and explain how risk materialised or did not materialise in the final outturn.
BCIS submission: RICS members are expected (RICS Cost Analysis and Benchmarking, 2nd ed.) to submit completed cost analysis data to BCIS in the standard format — contributing to the industry benchmark database.

Section 3

Practical Application

Step 1

Extract the approved budget at each formal cost plan stage (CP1, CP2, CP3, pre-tender estimate, contract sum) and the agreed Final Account figure — these are the key milestones in the reconciliation.

Step 2

For each cost movement between stages, identify the driver category: design development (scope unchanged, design element developed); scope change (client-instructed variations); market conditions (tender market above/below estimate); risk events (items from risk register materialising); post-contract changes (contractor-initiated variations, claims).

Step 3

Prepare the elemental reconciliation: using the NRM1/SFCA elements, show the Cost Plan 1 figure, the contract sum elemental split, and the Final Account elemental split; calculate the variance for each element.

Step 4

Calculate cost/m² GIFA for each element at Final Account stage; compare to BCIS mean and upper quartile for the project type; explain significant variances from benchmark.

Step 5

Prepare a summary narrative of the top 5 cost drivers — the items that individually caused the most significant movement between CP1 and Final Account — for inclusion in the Final Cost Report executive summary.

Step 6

Cross-check the reconciliation against the Final Account Agreement and the Variation Account to ensure all items are accounted for and no amounts are double-counted or omitted.

Step 7

Submit the completed cost analysis data to BCIS in the standard format; file a copy in the firm's project knowledge base for use on future estimates.

Section 4

Common Mistakes to Avoid

Presenting a single-line budget vs outturn comparison without an elemental breakdown — the client cannot understand what changed and why without the elemental structure.
Categorising all variations as 'client-instructed scope changes' without distinguishing design development, market, risk, and contractor-initiated items — this misrepresents the project cost story and obscures the QS's own estimating accuracy.
Failing to submit BCIS cost analysis data — this is a professional obligation and omitting it deprives the industry of the benchmarking data that underpins every future estimate.
Using net area (NIA) instead of GIFA for the cost/m² calculation — BCIS data is benchmarked on GIFA and using a different metric makes the comparison meaningless.
Completing the reconciliation after the Final Cost Report is issued — the reconciliation should be completed and agreed before the Final Cost Report is issued to the client.

Section 5

APC Competency & Quick Reference

Project Financial Control and Reporting Level 3 — cost plan reconciliation, variance analysis, client reporting
Quantity Surveying & Construction Level 3 — elemental cost analysis, BCIS benchmarking, SFCA format

What is the SFCA and why is it used for cost plan reconciliation?

The Standard Form of Cost Analysis (SFCA) is the BCIS/RICS elemental cost breakdown framework — the same structure used in NRM1. It allows cost data to be compared consistently across projects and provides the basis for BCIS benchmarking. Using the SFCA for the Cost Plan Reconciliation ensures the final cost data can be submitted to BCIS and benchmarked against industry averages for the same project type.

How should the QS categorise cost movement between cost plan stages?

By driver category: (1) Design development — same scope, design developed from outline to detail; (2) Scope change — client-instructed additional/omitted works; (3) Market conditions — tender market above/below estimate; (4) Risk events — items from the risk register that materialised; (5) Post-contract changes — contractor variations, claims, loss and expense. This categorisation enables honest analysis of estimating accuracy versus external factors.

What measurement basis should be used for BCIS benchmarking?

Gross Internal Floor Area (GIFA) as defined in the RICS Property Measurement Professional Statement (2nd ed., 2018). GIFA includes all enclosed floor area measured to internal face of perimeter walls, including internal partitions, structural elements, and service areas. NIA, GEA, and other measures are incompatible with BCIS benchmarks unless GIFA is not available.

Section 6

Completion & Final Account Checklist

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Task

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Cost history extracted at each formal stage: CP1, CP2, CP3, pre-tender, contract sum, Final Account

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Elemental reconciliation prepared in NRM1/SFCA format

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Cost movement between stages categorised by driver type

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Cost/m² GIFA calculated per element and compared to BCIS benchmarks

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Top 5 cost drivers identified for executive summary narrative

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Reconciliation cross-checked against Final Account Agreement

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BCIS cost analysis data submitted in standard format

Section 7

CPD Learning Outcomes

Prepare a Cost Plan Reconciliation in BCIS/SFCA elemental format, tracing cost movement from original budget to Final Account and categorising variances by driver type.
Calculate and interpret cost/m² GIFA benchmarks by element against BCIS data for the relevant project type, identifying significant variances and their causes.
Submit completed cost analysis data to BCIS in the standard format in compliance with RICS Cost Analysis and Benchmarking (2nd ed., August 2024) professional obligations.

Section 8