Cost Value Reconciliation (CVR)

The goal of an organization in a business environment is profit-making. However, delivering and meeting the client's requirements and expectations are key to sustaining the firm business. Effective management of cost and value is the basis for the expected profit. The cost and value are the links between the contractor and

1. The paying party or client

2. Subcontractors and suppliers (allied professionals)

The scenarios

1. The contractor presents a cost to the client/ project initiator/ paying party

2. The contractor arranges, manages, and supervises allied professionals to achieve value in the project

Cost is achieved through the knowledge of estimating principle, that is developing rates through (a). first principle (b). Specialist cost (c). Past experience i.e., sum.

Value is the careful disintegration of bill rates/amounts into different items, packages, and frameworks that will be executed by direct workmen, subcontractors, and suppliers.

The difference between the cost and value is the contractor's profit and overhead. The management of construction overhead in a contract is different between organizations. An organization could include all its overhead in the preliminaries while others might factor their overhead on all the items of the contract.

The contractor's value management is a continuous process geared at coordinating and controlling the expected cost of items, frameworks, and packages within a set budget to expose potential loss; reveal opportunities; and ensure the value fit within the budget.

The cost-value reconciliation is a mathematical exercise that shows the relationship between these two and it reveals at specific intervals the potential construction project profit, loss, and opportunities.

Example


















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