Project Cost Control: What a Contractor ERP Shows Weekly

Every week, a contractor's project director should be able to answer five questions in under ten minutes: are we earning what we are spending, are we on schedule, what have we built that we have not been paid for, what cash do we need in the next quarter, and which contract limits are we close to breaching. If those answers live in five spreadsheets owned by five people, the answers arrive late and disagree. An ERP set up for project cost control puts them on one screen, from the same numbers, every week.

This article is for contractors and subcontractors working on Saudi public and private projects, and for the PMO and finance leads who report on them. It sets out what the weekly view should contain, the measures behind it, and the Saudi contract rules the system has to track.

The weekly view on one page

Block	What it shows	Who acts on it
Cost by cost code	Budget, committed, actual, forecast at completion, variance	Project manager, cost controller
Earned value	Planned value, earned value, actual cost, CPI, SPI	Project director
Variation orders	Submitted, approved, pending, rejected, cumulative against contract ceiling	Commercial manager
Progress claims	Claimed, certified, paid, ageing of certified but unpaid	Finance, commercial
Retention and guarantees	Retention held by client, retention held from subcontractors, bank guarantees and expiry dates	Finance
Cash forecast	Inflows and outflows by week for the next 13 weeks	CFO
Subcontractor position	Committed, certified, paid, back-charges	Procurement, project manager

Every block comes from transactions already in the system: purchase orders, goods receipts, timesheets, subcontractor certificates, client certificates. Nobody types a number into the weekly report.

Earned value, without the theory

Earned value compares three numbers. Planned value is the budgeted cost of the work scheduled to date. Earned value is the budgeted cost of the work actually done. Actual cost is what the work done has cost. From them, the cost performance index is earned value divided by actual cost, and the schedule performance index is earned value divided by planned value. A value of 1.0 means on target; below 1.0 means over cost or behind schedule. These are the standard definitions used in PMI's earned value literature.

The formulas are simple. The discipline is not. Three rules make earned value honest on a Saudi site:

• Agree the progress measurement rule per activity before work starts. Units installed for pipe and cable. Weighted milestones for equipment: delivered, set, connected, tested. Percent complete by judgement only where nothing else works, and flagged as such.
• Tie the cost codes to the bill of quantities. If the budget is structured one way and the client's BOQ another, nobody can reconcile progress to claims.
• Cut off weekly, on the same day. Costs and progress must describe the same period. A late batch of timesheets will make a healthy week look bad.

Read the indices as trends, not snapshots. A CPI drifting down for three weeks on one cost code is an early warning. A single week's dip usually means a cut-off problem.

Variation orders: track the ceiling, not just the log

Under the current Government Tenders and Procurement Law (Article 69), a government entity may issue change orders that increase a contract by no more than 10% of its value, or decrease it by no more than 20%. On public contracts, the ERP should show the cumulative value of approved and pending variations against that ceiling for each contract, so the commercial team sees the limit coming before the client raises it.

Three numbers matter every week:

1. Approved variations, already in the revised contract value.
2. Pending variations, submitted but not approved.
3. Unsubmitted variations, work instructed on site that has not yet been priced and submitted.

The third number is where margin disappears. Work done on a site instruction, with no variation submitted, is cost without a route to revenue. Each one should carry an owner and a submission date.

Variations also move the programme. Article 74 of the same law lists the cases where a contract can be extended and the delay penalty waived, including when the contractor is assigned additional work and when the delay is caused by the government entity. Link each variation to its schedule impact and to the extension request, because delay penalties under Article 72 can reach 20% of the contract value for contracts other than supply.

Progress claims, retention and cash

Profit on paper does not pay salaries. A project with a healthy margin can still run out of cash. The weekly view should follow every riyal from site to bank:

• Claimed, certified and paid. The gap between what you claimed and what the client certified is claim leakage; track it by line item so you know whether the problem is measurement, documentation or dispute.
• Ageing of certified but unpaid amounts, by client. The Ministry of Finance states that the new procurement law requires a government entity to process private sector dues within the prescribed timeframes before it can enter new contractual commitments. Your system should record due dates precisely enough to show which dues are late.
• Advance payment recovery. Under Article 66 of the current law, an advance payment is made against a bank guarantee equal to its value. Show the balance still to be recovered from future claims and the guarantee that covers it.
• Final guarantee. Article 61 requires a final guarantee of 5% of the contract value from the winning bidder. Track every guarantee's amount and expiry date, with alerts well ahead of expiry.
• Retention. Show retention held by each client and retention you hold from each subcontractor, under the terms of each contract, with expected release dates. Retention is real cash with a date attached.
• The 13-week cash forecast. Built from the schedule, the claim cycle, supplier payment terms and payroll. It should be the first thing the CFO sees.

Two procurement laws in one portfolio

Saudi Arabia approved a new Government Tenders and Procurement Law by Royal Decree M/76 in 1448H. The accompanying Council of Ministers decision states that the 2019 law continues to apply to works and procurements tendered while it was in force. For a contractor, that means two rulebooks in one portfolio for years to come.

Do not hard-code the rules. Store the governing law on each contract, and keep the variation ceiling, penalty caps, guarantee percentages and payment terms as contract parameters. When the new law's detailed rules apply to a contract, you change parameters, not software. The same applies to private contracts, whose terms are whatever you signed.

Dates, calendars and approvals

Saudi contracts, letters and government correspondence often carry Hijri dates, while schedules and finance usually run on the Gregorian calendar. Store both on every contractual date: award, site handover, completion, guarantee expiry. Errors in converting a completion date are costly when a penalty clock depends on it.

Approvals need the same care. A variation priced by the quantity surveyor, checked by the commercial manager and accepted by the project director should leave that trail in the system. So should every subcontract: Article 71 requires the government entity's written approval before a contractor subcontracts part of the work.

Checklist: the weekly report is ready when

• Every cost line has budget, committed, actual and forecast at completion, from transactions, not typed figures.
• CPI and SPI are shown per project and per major cost code, with a four-week trend.
• Variations are split into approved, pending and unsubmitted, with cumulative value against the contract ceiling.
• Claims show claimed, certified and paid, with ageing by client.
• Retention, advance payment balances and guarantee expiry dates are visible per contract.
• The 13-week cash forecast reconciles to the schedule and the claim cycle.
• Each contract carries its governing law and its own limits as parameters.

TQN implements ERP and PMO systems for cost control, procurement and project delivery, integrated with the scheduling and finance tools you already run, with training and handover so your team owns the result. For contractors on large programmes, see how this fits construction and giga-projects.

Start with what you report today

Book an Operations Fit Review. In a 45-minute call on your current tools and weekly reporting, we show which of these numbers you already have, which are missing, and what it would take to put them on one screen. The review is free.