Why Forward-Looking Project Control Matters More Than Explaining Deviations After The Fact

The reporting trap

Why the useful forecast begins before the monthly report

Management reporting is often very good at explaining what has already happened. The figures are reconciled, deviations are classified and comments are written. By the time the discussion reaches the management meeting, however, the opportunity to influence some of those deviations has already passed. The problem is not the quality of accounting. It is the assumption that a precise description of the past is sufficient for managing the future.

In project-based industrial business, this distinction is especially important. A project may show an acceptable cost position today while already carrying commitments that will produce a serious overrun later. A supplier delay, a change in technical scope or a longer installation period may be visible to the project team before it becomes visible in the accounts. Waiting for the monthly result means waiting until knowledge has become expenditure.

I describe the alternative as preview rather than review. The point is not to abolish retrospective analysis. Reliable actual costs remain indispensable. But they should be combined with an informed estimate of the work still to be done. A forecast becomes useful when it connects actual expenditure, outstanding commitments, technical progress and the realistic cost of completion. It should show not merely where the project stands, but where it is heading if nothing changes.

This requires a different conversation. Instead of asking only why the reported figure differs from the budget, management should ask what has changed in the remaining work, which assumptions are no longer valid and which corrective actions are still possible. A cost-to-complete estimate is not an exercise in optimism. It is a disciplined assessment of what the organisation now knows about the future delivery of the project.

Engineering plays a central role. Financial forecasts cannot be built solely from accounting trends when the underlying technical work is changing. The remaining quantities, outstanding design decisions, procurement exposure and site conditions must be understood. The finance function can challenge and consolidate this information, but it cannot substitute for the technical assessment. A credible forecast is therefore a joint product of project delivery, engineering and commercial management.

The greatest weakness in many reviews is the treatment of action. Deviations are discussed, explanations are accepted and the meeting moves on. Yet an explanation does not change the result. Every material risk or forecast deterioration should lead to a decision: can the technical approach be adjusted, can a supplier issue be resolved, is a customer change recoverable, or must management accept a revised expectation? Responsibility for the decision should be explicit, as should the date on which its effect will be reviewed.

This approach also changes the meaning of accuracy. A forecast that is revised promptly when new information emerges is more useful than a stable forecast maintained to avoid uncomfortable discussions. Forecast quality should be judged by whether it supports timely decisions, not by whether it makes last month’s management presentation look consistent. The willingness to surface bad news early is a sign of organisational maturity.

The estimate must move with the project

An industrial project does not become economically predictable merely because a budget has been approved. The original estimate records what the organisation believed when it made its commitment. It is not a guarantee that engineering, procurement and execution will unfold exactly as anticipated. The decisive question during execution is therefore not only how much money has been spent. It is what the remaining work will cost, and what can still be done to influence that outcome.

This distinction sounds obvious, yet it is frequently obscured by reporting routines. A project may show actual expenditure below the planned curve because work has been delayed. The financial report then looks favourable while the schedule and the future cost position deteriorate. Conversely, an early purchase may temporarily create an unfavourable cash or cost comparison even though the underlying project remains healthy. Neither observation can be interpreted reliably without an understanding of the physical progress and the remaining scope.

Continuous re-estimating, or Mitkalkulation, closes the gap between the original calculation and the latest knowledge about the project. Its purpose is not to conduct a retrospective trial of the estimating department. It is to develop a realistic, technically informed view of the cost to complete. That view must be updated as design decisions become firm, supplier quotations turn into commitments, installation conditions become known and risks either materialise or disappear.

The quantity framework is again central. If the amount of piping, structural steel, cabling or assembly work changes, the project team must understand why. A quantity may have increased because the customer’s scope changed, because the engineering solution developed or because the original assumptions were incomplete. These explanations are commercially different. One may support a claim; another may require an internal correction; a third may reveal a problem in the estimating process that should be addressed in future offers. A single variance figure cannot tell the whole story.

The people involved in the forecast must therefore represent the work itself. Engineering contributes knowledge about design maturity and unresolved interfaces. Procurement distinguishes firm commitments from expected prices. Project execution assesses physical progress, productivity and remaining activities. Commercial project control makes the implications transparent. The project manager has to convert the combined picture into decisions. A forecast prepared without these perspectives risks becoming a mathematical extrapolation rather than a credible assessment of the work ahead.

The most useful forecast is not necessarily the one with the greatest numerical precision. It is the one that distinguishes confirmed information from assumptions and makes uncertainty visible. A remaining cost estimate may be a range when a technical issue is unresolved. Presenting one exact number does not remove that uncertainty; it merely conceals it. Management needs to know which conditions could change the result and when those conditions will become clearer.

A regular discussion of remaining costs should always end with the question of influence. Can the technical solution be simplified without compromising the agreed performance? Can procurement change the sequence of deliveries? Can installation work be organised differently? Does a customer clarification need to be obtained before further commitments are made? The purpose of the discussion is not to explain a deviation after the fact but to identify options while action is still possible.

An early warning is not yet a decision

A warning has value only while the organisation can still do something about the situation it describes. This sounds obvious, yet many management systems are built around the reliable presentation of developments that are already too far advanced to influence. A project report may show a deteriorating margin, but the critical procurement decision may have been made weeks earlier. It may identify schedule pressure after the installation sequence has become fixed. In such cases the information is accurate and late. The question for project control is not simply whether the report is correct. It is whether the report arrives before the relevant options disappear.

Predictive analytics can help by detecting patterns that deserve investigation. Rising engineering hours, repeated changes to technical documents, delayed supplier confirmations and a growing number of unresolved interfaces may together indicate that the project is becoming unstable. Historical data might show that such combinations have often preceded cost or schedule problems. But an observed correlation is not an explanation of the cause. The team must establish what is happening in the current project and whether the pattern is genuinely relevant.

An early-warning process therefore needs three elements. The first is a signal that can be observed with sufficient reliability. The second is a professional interpretation that connects the signal to the work still to be done. The third is a response that is both possible and assigned to someone. A warning without the second element creates noise. A warning without the third creates frustration. Employees learn to ignore indicators when those indicators produce additional meetings but no decisions.

The useful conversation begins with the remaining work. If a supplier is late, what activities depend on the delivery? Can the sequence be changed without creating greater cost elsewhere? Is an alternative component technically acceptable? What would acceleration cost, and how would that compare with the consequences of waiting? These questions cannot be answered by a single risk score. They require engineering, procurement, project management and commercial judgement to work from the same facts.

This is the reason I prefer preview to a purely retrospective review. A review asks what happened and why. A preview asks what is likely to happen next and which choices remain available. Both are necessary. The review supports accountability and learning; the preview supports intervention. Continuous re-estimating connects them by showing how new information changes the expected cost of the remaining work. The forecast becomes a management instrument when it leads to decisions, not merely when it becomes more accurate.

A company should also be careful about the number of indicators it introduces. Every measure creates work and draws attention. If a project team is required to explain dozens of coloured status signals, the reporting process can consume the time needed to address the actual problems. I would rather see a small set of indicators that lead to specific conversations about quantities, interfaces, remaining hours, procurement and claims. The right indicator is not necessarily the most sophisticated one. It is the one that helps the organisation recognise a consequential development early enough to respond.

From forecast number to management choice

A forecast can be mathematically precise and managerially weak. This happens when the organisation invests considerable effort in calculating the expected final result but devotes little attention to the choices that could change it. A cost-to-complete forecast is indispensable in industrial project business, yet it is not identical with control. Forecasting describes a possible outcome on the basis of current knowledge. Steering begins when management identifies an alternative course of action, assesses its economic consequences and assigns responsibility for execution. The difference is fundamental: one improves visibility; the other changes the future.

Forecast maturity starts with the quality of the remaining-work assessment. The project team must understand what has been completed, what remains, which resources are needed and how technical changes influence time and cost. Historical spending alone cannot answer these questions. A project that has spent less than planned may be efficient, but it may also have deferred work or underestimated remaining complexity. Likewise, an early overrun does not automatically imply a proportional final loss. A meaningful forecast links the current technical status with the commercial model and challenges the assumptions behind both.

Uncertainty should be expressed rather than hidden in a single apparently definitive number. The appropriate level of detail depends on the project, but management benefits from knowing which elements are stable and which depend on unresolved engineering, suppliers, site conditions or customer decisions. Ranges and scenarios can make the consequences visible without pretending that all uncertainty can be quantified precisely. The point is not to produce an elaborate statistical model for every issue. It is to prevent a narrow forecast from becoming a substitute for judgement and to make the conditions for a better or worse outcome explicit.

The timing of a decision determines much of its economic value. Before an order is placed, a design change may be relatively inexpensive. After equipment is manufactured, installed or tested, the same change may involve rework, delays and contractual consequences. A review focused exclusively on explaining last month’s deviation arrives too late to exploit many of these options. Preview before review is therefore not a slogan against accounting. It is a reminder that economic management should devote its best attention to work and commitments that are still influenceable. Past deviations remain important because they reveal mechanisms, but the immediate management question is what can still be changed.

A mature forecast meeting ends with a decision agenda, not simply an updated estimate at completion. Which risk requires intervention now? What technical alternative should be examined? What information must be obtained from the customer or supplier? Who can authorise the next step, and by when? The revised number matters because it reveals the scale of the issue. The management value comes from converting that insight into action. When forecasting, engineering and commercial responsibility are connected in this way, the forecast becomes part of a learning control system rather than a recurring explanation of results that can no longer be changed.

Figure 1. From review to preview. Source: Author’s conceptual illustration.

When the reporting calendar is too slow

Monthly reporting has an important place in financial management, but a project does not wait for the reporting calendar before its economic outlook changes. A supplier misses a critical delivery, a customer modifies a technical requirement, engineering identifies a quantity increase or an installation sequence becomes impossible. Each event may change the remaining work and its expected cost immediately. If the project continues to use the previous forecast until the next reporting cycle, the official numbers may remain stable precisely when the underlying reality is moving. Stability of reporting is not the same as stability of the result.

Event-driven re-estimating does not mean calculating everything continuously. It means defining which developments are significant enough to require a fresh economic assessment. The first question is whether the event affects the expected remaining cost, completion date, scope, contractual entitlement or risk exposure. A small technical adjustment may have no material effect. A seemingly modest change at a critical interface may disrupt several work packages. The judgement depends on the mechanism, not merely on the size or visibility of the event.

This approach changes the role of concurrent estimating. Instead of functioning only as a periodic comparison between budget and actual expenditure, it becomes a means of interpreting new information while management can still respond. The estimator or commercial project function works with engineering, procurement and execution to understand what has changed. The team distinguishes costs already incurred, commitments that are effectively fixed and work whose execution can still be influenced. The resulting forecast is not a prediction detached from operations. It is a revised economic picture based on the work that remains.

An event should produce a proportionate response. A major design change may require a structured technical and commercial review; a supplier warning may initially require clarification of delivery probability and alternative sourcing. A relevant risk becoming more likely should lead to a new assessment of its possible consequences. Not every signal deserves executive escalation. Clear thresholds and ownership help teams decide which changes can be handled locally and which require management attention. The objective is speed with discipline, not permanent alarm.

Event-driven review also creates an important link to claim management. A change in the technical or scheduling reality may create an entitlement or obligation under the contract. If the commercial implications are assessed weeks after the event, evidence may be harder to recover and opportunities for timely notification may be lost. The technical and contractual analyses should therefore run in parallel. A revised internal forecast and an external claim are not the same thing: the forecast reflects the best estimate of economic outcome, while the claim concerns rights and obligations under the contract. Both need timely information.

What remains controllable

Cost to complete is often treated as a single forecast number. It is necessary, but insufficient for active management. Some future expenditure is already economically committed: orders have been placed, contracts signed or technical choices advanced beyond the point at which changing them would make sense. Other expenditure remains open to influence through engineering, sequencing, procurement, staffing or negotiation. Both categories belong in the forecast, yet they have very different implications for management. The first describes what is likely to happen. The second also points to what can still be changed.

The controllable share of remaining cost is not simply the value of purchase orders that have not yet been issued. A component may be uncommitted in accounting terms but effectively fixed because the required delivery date leaves no credible alternative supplier. Conversely, a planned engineering solution may still be redesigned even after substantial work has been completed, provided the change is technically feasible and economically justified. Controllability depends on the interaction of technical options, contractual constraints, time and available resources. It must be assessed in context.

This distinction gives substance to the principle of preview rather than review. A retrospective review explains why the project moved away from its original expectation. A preview examines the remaining work while choices still exist. It asks which cost elements are exposed, which decisions can change them, how much time remains for action and what side effects an intervention may create. A project team may discover that the largest forecast overrun is already unavoidable, while a smaller category of future work offers a genuine opportunity for mitigation. Management should concentrate its energy where decisions still have leverage.

The analysis should not confuse theoretical potential with real savings. Reducing the estimated hours of an activity is not an improvement unless the team can identify a different method, resource arrangement or technical solution that makes the reduction credible. Similarly, postponing necessary work can improve a short-term view while worsening the final result. Each proposed intervention needs a causal explanation: what will be done differently, which constraint will be removed, who will implement the change and what evidence will show whether it worked. The purpose is to identify alternatives, not to make the forecast look better.

Time is often the decisive factor. A design change that would save material may no longer be worthwhile once procurement and manufacturing have advanced. A different installation sequence may be feasible before site mobilisation but disruptive after crews have arrived. This means the value of a management decision can decline rapidly even if the underlying cost exposure has not yet appeared in the accounts. Early economic discussion is therefore essential. The organisation must bring the relevant disciplines together before the window of influence closes.

Preserving the logic of the original estimate

The first estimate has an unusually long life. It may be prepared under time pressure, based on a preliminary design and surrounded by assumptions that are understood by the proposal team but never fully documented. Once the contract has been signed, that number becomes the budget against which performance is judged. The organisation then begins reporting deviations, although the original conditions may have changed substantially. A budget is necessary, but it is not a forecast. It records an approved reference point. It does not automatically tell management what the project will cost from today onward.

A steering-oriented approach requires a different question: what work remains, what will that work require, and what can we still influence? This is the logic of re-estimating the cost to complete. The project team should not merely add historical expenditure to the unused portion of an old budget. It should rebuild the remaining effort from the current technical and operational situation. Outstanding quantities, engineering maturity, procurement commitments, installation progress, productivity, unresolved claims and risks all belong in that assessment. The forecast is credible only when the people responsible for the remaining work participate in producing it.

This is where the distinction between review and preview becomes operational. A review explains why the past differed from the plan. That is useful for accountability and learning, but it has limited value if the next decision is already overdue. A preview identifies the gap that is likely to emerge and the action that could still prevent it. The point is not to replace financial reporting. It is to connect reporting with forward-looking management. The commercial team provides structure and challenge; the technical and project teams supply the latest understanding of the work; leadership decides which interventions deserve resources.

The forecast should separate three elements that are often mixed together. First, there are committed costs that can no longer be influenced meaningfully. Second, there are remaining activities for which quantity, method or productivity can still change. Third, there are uncertainties that have not yet become definite work but may affect the outcome. Treating all three as a single undifferentiated percentage conceals the real decision space. A project with high committed expenditure and limited remaining flexibility requires different management action from a project with similar forecast exposure but substantial work still ahead.

A useful discussion therefore moves from variance to cause, from cause to remaining exposure, and from exposure to options. If installation hours are rising, management needs to know whether the increase comes from missing quantities, an unrealistic productivity assumption, customer changes, sequencing problems or repeated work. Each explanation leads to a different response. A generic instruction to reduce hours is rarely a response at all. It may simply push the problem into the next reporting period.

This is an adapted selection from the author’s English-language POWER book manuscript.

Carsten Knappe-Finger, Industrial Management & Intelligent Estimating Management (IKM)