Cost Forecasting

What is a Cost Forecast?

A cost forecast refers to the prospective determination of a project's total costs up to the point of completion. It indicates the financial resources likely required to successfully complete a construction or real estate project. The cost forecast is based on actual costs incurred, open commitments (order values), future services, and potential risks. It is therefore one of the most crucial control instruments in project controlling and cost planning within the construction industry.

Significance of Cost Forecasting in Project and Real Estate Management

Cost forecasting is crucial as it provides transparency regarding the economic progression of a construction project. It enables:

• Early Detection of Deviations and Cost Increases: Forecasts highlight cost developments before overruns occur.
• Informed Decisions and Cost Control: Project stakeholders and clients can derive measures to contain or reallocate costs.
• Security for Investors, Banks, and Building Owners: A valid forecast is the basis for financing and credit decisions, as well as for the project's economic viability.
• Fund Flow Planning and Cash Flow Management: The forecast supports liquidity planning through to project completion.
• Portfolio Comparisons and Multi-Project Controlling: Forecasts enable project comparability and aid in investment management.

Cost forecasting thus constitutes an essential foundation for successful cost planning, cost estimation, and controlling within the construction and real estate industry.

Components of a Cost Forecast.

A cost forecast typically comprises the following elements:

1. Actual Costs

Costs already incurred and settled, serving as the basis for the forecast.

2. Commitments (Contract Values)

Costs that are already fixed by concluded contracts and are considered target costs throughout the project.

3. Still Outstanding Costs (Remaining Costs)

Estimated costs for services yet to be awarded or rendered, including potential change orders.

4. Risks and Opportunities

Assessed cost risks or potential savings that are incorporated into the forecast and influence the accuracy of the cost estimate.

5. Total Costs at Completion

Final forecast result: the expected project costs at completion, also referred to as the cost framework or cost status.

Cost Forecasting in the Construction and Real Estate Industry

In practice, cost forecasting is utilized to maintain a realistic overview of a construction project's final financial status at all times. Examples include:

• In Case of Cost Increases: Rising material prices, construction delays, or plan changes can influence future construction costs.
• For Contract Awards: Services not yet commissioned must be estimated and integrated into the forecast.
• For Portfolio Analyses: Cost forecasts are essential for investors and Building Owners who evaluate the economic developments of multiple projects simultaneously.

Related Terms

• Budget Forecast
• Project Costs
• Cost Progression
• Forecast
• Project Controlling

Cost Forecasting in PROBIS

PROBIS offers a powerful forecasting module that precisely supports the determination of costs to completion. Functions include:

• Automated Forecasting: PROBIS automatically combines actual costs, contract values, and remaining costs.
• Multidimensional Analysis: Forecasts can be analyzed by cost groups, contracts, building components, or titles.
• Risk Management Integration: Risks and opportunities are directly incorporated into the forecast.
• Real-time Updates: Any change in budget, contract award, or performance immediately updates the forecast.
• Portfolio Capability: Forecasts for individual projects or multiple projects can be displayed in parallel.
• Transparent Reports: Cost forecasts can be exported in clear reports and shared with banks or investors.

PROBIS thereby enables precise and dynamic forecasting, which establishes both planning certainty and transparency.

Conclusion: What is a Cost Forecast?

A cost forecast is the prospective determination of all costs until project completion. It combines incurred costs, commitments, remaining services, and risks into a realistic total value. PROBIS supports this process with automated, transparent, and continuously updated forecasting functions – enabling efficient management, cost control, and reliable decision-making.