WIP & Cost-to-Complete Forecasting

This use case explains how to approximate work in progress (WIP) and cost to complete for construction and contracting projects using Model Reef.

Model Reef does not implement full accounting treatment of construction contracts. Instead, you can create planning level WIP and cost to complete structures that:

• Use project level contract, cost and progress drivers.

• Estimate remaining cost and margin.

• Show how much work and cost is ahead or behind plan.

The goal is to support project and portfolio management decisions, not to replace your official WIP accounting system.

When to use this pattern

Use this pattern when:

• You manage multiple long running construction or contracting projects.

• You need forward visibility on cost to complete and margin, per project and in aggregate.

• You want to test scenarios such as cost overruns, delays or scope changes.

Combine this with:

• Project Cash Flow (Milestones) for cash timing.

• Multi-Project Consolidated Model for portfolio views.

Architecture overview

You will build:

1

Project level drivers

• Contract value.

• Original budgeted cost.

• Current forecast cost.

• Measured progress percentage.

2

Derived WIP metrics

• Earned value (value of work performed).

• Cost to complete.

• Forecast final margin and margin percentage.

3

Variables and outputs

• Project level WIP and cost to complete series.

• Portfolio dashboards showing risk and margin.

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The following steps show a practical sequence to implement the above architecture in Model Reef.

1

Step: Capture project level contract and cost baselines

In the Data Library, define entries per project for:

• Contract Value - Project X.

• Original Budgeted Cost - Project X.

• Current Forecast Cost - Project X.

These can be imported from your project costing system or maintained directly in Model Reef.

Optionally, include:

• Approved Variations - Project X.

• Provisional Sums - Project X.

• Contingency Allowance - Project X.

This provides a baseline for measuring performance and risk.

2

Step: Define progress measures

Decide how you want to measure progress per project, for example:

• Percentage complete based on quantity surveys.

• Percentage complete based on cost incurred relative to forecast cost.

• Milestone completions mapped to percentage complete.

In the Data Library, create a progress driver per project, for example:

• Progress Percentage - Project X.

Update this by period based on site reporting or cost data.

3

Step: Compute earned value and WIP

Use variables in each project branch to compute:

• Earned Value = Contract Value × Progress Percentage.

• Cost Incurred to Date based on accumulated actual costs in the model.

• WIP Position = Earned Value minus Cost Incurred to Date.

Interpretation:

• Positive WIP may indicate you are ahead on margin recognition relative to cost.

• Negative WIP may indicate you are behind or have under recognised revenue relative to cost.

For planning purposes, treat WIP as an analytical metric rather than implementing detailed WIP journal entries.

4

Step: Estimate cost to complete

Estimate cost to complete using:

• Cost to Complete = Current Forecast Cost minus Cost Incurred to Date.

You can create a Cost variable such as Cost to Complete - Project X that represents the expected future costs over remaining periods, either by:

• Spreading cost to complete evenly over remaining duration, or

• Using a schedule based on planned activity and procurement.

These cost to complete variables should be set up as COGS or Opex, depending on how you represent project costs in your P&L.

5

Step: Forecast final margin and margin changes

From contract value and forecast cost, derive:

• Forecast Final Margin = Contract Value minus Current Forecast Cost.

• Forecast Final Margin Percentage = Forecast Final Margin divided by Contract Value.

Compare this to original margin to see:

• Margin erosion due to cost overruns.

• Margin improvement due to favourable variations or efficiencies.

Present these metrics per project in a dashboard or report, and highlight projects with significant margin changes.

6

Step: Build portfolio level WIP and cost to complete views

Aggregate project level WIP and cost to complete metrics in the Group branch and create a dashboard that shows:

• Total cost to complete per period.

• Total expected margin remaining.

• Distribution of projects by margin risk (for example traffic light coding based on margin degradation).

• Projects with the largest cost to complete or margin at risk.

Use this to guide management focus towards high risk or high value projects.

7

Step: Use scenarios for risk and overrun analysis

Clone your base model into scenario models that represent:

• Base case (current best forecast).

• Downside case (cost overruns, delay, lower recovery of variations).

• Upside case (better buying, improved productivity).

Adjust drivers for:

• Current forecast cost.

• Progress rates.

• Variations.

• Contingency use.

Compare cost to complete, WIP and final margin metrics between models to understand the sensitivity of the portfolio to key risk factors.

Check your work

• Contract values and cost baselines per project reconcile to your source systems.

• Progress percentages are reasonable and sourced from consistent field data.

• Cost to complete and forecast margins are in line with project manager expectations.

• Portfolio views align with known areas of risk and opportunity.

Troubleshooting

WIP swings unexpectedly

Check for large jumps in progress percentage or cost incurred, and ensure variations and forecast cost updates are applied consistently.

Cost to complete appears negative

Confirm that current forecast cost is up to date and that cost incurred does not exceed forecast by mistake.

Difficult to match accounting WIP reports

Treat Model Reef’s WIP metrics as planning approximations and use them to inform discussion alongside, not instead of, formal accounting reports.

Related guides

• Build an LBO Model

• Build an M&A Consolidation Model

• Staff Cost Mapping

• Formula Modal