Cost to complete missing real construction funding risk

The QS certifies progress, not payment

Cost to Complete remains the fundamental metric in construction funding risk reporting, but it has one structural limitation – it recognises costs when progress is certified & assumes that payment to subcontractors & suppliers follows.

Of course, it often doesn’t. Although the QS assessment sits at the centre of critical funding decisions each month, the reality is that your Cost to Complete forecast is only as reliable as the ‘stat decs’ behind it.

Cost to Complete forecasts ignore unpaid claims

Without alignment between progress claims, drawdowns and subcontractor payments, certified but unpaid work can accumulate without changing the reported Cost to Complete position. This means that a project may appear on budget even while carrying a significant funding shortfall risk.

For example, $50M of work may be certified and fully funded, but a 10% payment misalignment means an unsecured funding gap of $5M. This $5M is not captured in your forward-looking Cost to Complete forecast, but the exposure is real – this cash is now subject to the builders’ broader liquidity position. Practically, it can’t be assumed that these funds remain available to the project, meaning that any remaining contingency now exists on paper only.

Cost forecast reliability requires an understanding of ‘Cash to Complete’

The figure that ultimately matters to developers & lenders is ‘Cash to Complete’:

• the forecast cost to finish the remaining scope of work PLUS
• the value of any previously certified but as yet, unpaid claim

Cost to Complete measures what remains to be built; ‘Cash to Complete’ measures what remains to be paid.

In a functioning project, these figures should broadly correlate. Of course, a predictable (but temporary) gap attributable to the operational lag between progress, certification, funding and subcontractor payment is normal. But it’s when a material gap between progress & payment persists into the next payment cycle (i.e. a new claim has already been submitted) that risk begins to rise.

It’s not about replacing ‘Cost to Complete’ – it’s about verifying it

Cost to Complete reporting remains essential. It’s just missing is a simple verification step.

IPEX enables developers & lenders to link payment to progress by providing real-time visibility over who has been paid (& who has not), preventing liabilities from quietly accumulating. IPEX allows:

• validation of Cost to Complete forecasts against actual cash outflow
• early identification of unpaid subcontractors & suppliers
• the opportunity to resolve payment issues before further claims are approved, and
• detection of funding gaps before they become defaults

IPEX doesn’t change the existing Cost to Complete model — it makes it substantially more reliable.

Payment transparency does not require builder restrictions or disclosure of confidential information

Whilst the subcontractor payment ‘blind spot’ is universally acknowledged, a blanket requirement for transparency has often stalled on one argument: “some builders won’t accept it.” That position was somewhat understandable when payment visibility meant exposing elements of commercially sensitive information, but that trade-off is no longer necessary.

Subcontractor payment transparency does not require:

• restricting your builders access to project funds or,
• your builder to disclose subcontract values, payment amounts, their margin/letting gains

Payment validation has become a low-friction control over capital deployment and is now practical at scale because it can be implemented without commercial intrusion.

Unpaid subcontractors are the builders’ problem…until they’re not

Without validation of both progress AND payment, liquidity risk remains hidden, until it becomes loss. Whether your builder asks for more money, walks from the project or collapses, the gap between Cost to Complete and ‘Cash to Complete’ will eventually surface — ultimately to be funded by the developer and the lender.

Cost to Complete was never intended to confirm cash distribution. Relying on it as the sole basis for deploying millions in capital represents an avoidable risk & is becoming increasingly difficult to justify, particularly when payments can now be verified via a simple monthly check.

The risk is real. The solution exists. Why would any developer or lender choose to stay in the dark?

Get in touch to learn more.