What is cost value reconciliation (CVR)? A guide for UK contractors

Cost value reconciliation (CVR) is the monthly check that compares the cost a construction project has incurred with the value of the work done to date. It tells you the margin the job is really making now, and the margin it is heading for at completion. A quantity surveyor or commercial manager usually prepares it once a month, after the valuation, and it is the report that tells directors whether a job is making money long before the final account does.

CVR stands for cost value reconciliation. You will also hear cost value report, cost/value comparison or just "the CVR". It is a contractor's internal report, produced job by job, that sets two numbers side by side:

• Value: what the work done so far is worth under the contract.
• Cost: what it has actually cost you to do that work.

The difference is the margin to date. The CVR then forecasts both numbers to completion, which gives the margin the job will finish on. Designing Buildings Wiki describes it in the same terms: a regular comparison of cost against value to track the financial health of a project and catch overruns early.

It exists because construction cash and construction profit do not line up. You are paid on monthly applications that may be over or under the true value of the work. Costs arrive on their own timetable, and supplier and subcontractor invoices lag the work by weeks. Look at the bank balance or the ledger alone mid-job and you will get the wrong answer. The CVR is the adjustment that gets you to the right one.

It is not the same as the cost report a client's QS prepares. RICS guidance on cost reporting covers the client side: what the project will cost the employer. The CVR is the contractor's side: what the job is making for you. RICS lists cost/value reconciliations alongside estimates, budgets, valuations, cash flow and risk registers as part of cost and commercial management.

Most CVR arguments are really arguments about definitions. These are the ones that matter.

• Value to date (internal valuation). The work done up to the cut-off date, priced at contract rates, including agreed variations and a prudent figure for unagreed ones. It is your own honest view, which can differ from the amount you applied for and the amount certified.
• Certified and uncertified value. Certified value has been agreed in a payment certificate or notice. Uncertified value is work done but not yet certified, such as work since the valuation date or work the client's QS has under-measured.
• Cost to date. Everything the job has consumed: own labour, materials, plant, subcontractors and preliminaries, whether or not it has been invoiced.
• Accruals. Cost incurred but not yet in the ledger: deliveries without an invoice, plant on hire, subcontract work done but not yet applied for.
• Work in progress (WIP). In the accounts, the value of work done that has not yet been invoiced. The CVR is usually where the management accounts get this figure from.
• Over-recovery and under-recovery. Measured cost head by cost head. If prelims have earned £60,000 of value but cost £72,000, they are £12,000 under-recovered.
• Over-valuation. Where the application is ahead of the true value, for example front-loaded prelims or materials that have not been built in yet. The CVR strips it back out.
• Forecast final cost, value and margin. Cost to date plus cost to complete; the revised contract sum plus what you realistically expect to recover; the difference between them.
• Margin erosion (or fade). The forecast final margin falling month on month, or drifting below the tender margin.

The order matters, because each step depends on the one before it.

1. Fix the cut-off date. Use the same date for cost and value, usually month-end. Valuing work to the 31st against costs to the 25th creates profit that does not exist.
2. Establish value to date. Start from the latest application or certificate and adjust it to the cut-off. Add work done since the valuation date and strip out any over-valuation. Value agreed variations in full and unagreed ones at what you expect to settle, and carry the claimed figure in a separate column so the exposure stays visible.
3. Collect cost to date. Take the ledger by cost head and add accruals for goods received, plant on hire and labour not yet posted. Add subcontractor liabilities assessed to the cut-off date. Take out anything that belongs to another job.
4. Reconcile cost head by cost head. Compare value and cost for prelims, own labour, materials, plant and each subcontract package. Explain every material over- or under-recovery.
5. Forecast to completion. Build cost to complete from the work left to do, priced at current rates, plus orders placed but not yet consumed, plus a named provision for each known risk. Forecast final value is the revised contract sum plus what you realistically expect from variations and claims.
6. Compare with last month and the tender. The movement is the story. A forecast margin that has dropped two points since last month needs a reason in writing.
7. Review and sign off. The QS or commercial manager presents it, a director challenges it, and the actions are agreed: chase the variation, re-programme the gang, renegotiate the package.
8. Feed the accounts. Value and cost to date go into the management accounts. If the job is forecast to lose money, finance needs to know now rather than at the final account.

On a well-run job the numbers take a few hours and the conversation takes the rest. On a badly-run one, most of the time goes on finding out what the costs are.

A specialist subcontract package: £1,000,000 contract sum, £50,000 of agreed variations, priced at an 8% margin. We are at month six of twelve. These figures are illustrative.

VALUE TO DATE
  Certified to date                       £520,000
  Work done since valuation date           £15,000
  Value to date                           £535,000

COST TO DATE
  Ledger (invoiced and posted)            £448,000
  Accruals (incurred, not invoiced)        £52,000
  Cost to date                            £500,000

MARGIN TO DATE                  £35,000      6.5%

FORECAST AT COMPLETION
  Revised contract sum                  £1,050,000
  Pending variation (claimed £45,000)      £20,000
  Forecast final value                  £1,070,000

  Cost to date                            £500,000
  Cost to complete (current rates)        £520,000
  Risk provision (named)                   £15,000
  Forecast final cost                   £1,035,000

FORECAST FINAL MARGIN           £35,000      3.3%
Tender margin                                8.0%

Three things to read from this.

The accrual changes the story. Leave out the £52,000 and the job shows £87,000 margin to date, or 16.3%. Everybody relaxes, and the invoices land next quarter.

The forecast is what matters. 6.5% to date looks healthy against an 8% tender. But the remaining £535,000 of value is forecast to cost £535,000, so the rest of the job makes nothing. Either the work so far was valued generously or the cost of the remaining work has gone up. Both need an answer before month seven.

The cost heads show where. Break the same figures down and prelims show £60,000 of value against £72,000 of cost, a £12,000 under-recovery, because the programme is three weeks behind and site overheads are time-related. That is a delay conversation with the main contractor, not a rounding error.

Layouts vary between contractors, but a CVR report that a board can act on usually has six parts:

1. Header. Project, client, form of contract, period, cut-off date, prepared and reviewed by.
2. Contract value. Original sum, agreed variations, pending variations at claimed and expected value, revised total.
3. Cost value table. One row per cost head (prelims, labour, materials, plant, each subcontract package). Columns for value to date, cost to date, over/(under) recovery, forecast final value, forecast final cost and forecast margin.
4. Summary. Margin to date and forecast final margin, in pounds and percent, against tender and against last month.
5. Risks and opportunities. Each one named, priced and owned, and either included in the forecast or listed as excluded.
6. Cash. Applied, certified, paid and retention held, because a job can be profitable and still drain cash.

A portfolio CVR then rolls every job's summary line into one table. The column most often missing is movement since last month, and it is the one directors read first. A forecast margin of 4% tells you little. A forecast margin of 4% that was 7% last month needs a conversation.

• Missing accruals. The biggest one. The ledger shows what you have been invoiced, not what you have incurred.
• Different cut-off dates for cost and value. This creates profit or loss that does not exist.
• Valuing unagreed variations at the claimed figure. That books profit you have not secured. Carry the cost in full and the value at realistic settlement.
• Circular forecasting. Working out percent complete from cost, then forecasting remaining cost from percent complete. An overspending job then looks further along than it is.
• Forecasting at tender rates. Remaining work costs what it costs today, not what it cost when you priced it.
• Hidden contingency. Quietly holding margin back is as misleading as over-reporting it. Name every provision.
• Ignoring time-related prelims. When the programme slips, site overheads keep running while their value stays where it was.
• No actions. A CVR that is filed rather than discussed is just a record of what went wrong.

Several of these are made easier to commit by the spreadsheet itself. Our guide to CVR templates in Excel covers the three places a spreadsheet breaks: accruals, cost-to-complete circularity and version control.

Advantages

• Early warning. Margin erosion shows up months before the final account, while there is still time to act on it.
• One version of the truth per job. Site, commercial and finance argue from the same numbers.
• Discipline. Monthly cut-offs force valuations, variations and cost capture to be kept up to date.
• It feeds the accounts. Turnover, WIP and any loss provision come from it, so the management accounts reflect what is happening on site.
• Better cash conversations. Under-certification and slow variations become visible and can be chased.

Disadvantages

• It takes time. Every job, every month, usually done by the QS who also has to run the commercial side of the job.
• It depends on judgement. Valuing work, variations and cost to complete all need opinions. Optimism (or caution) creeps in, and two QSs can produce different answers from the same job.
• It is only as good as its inputs. Late invoices, missing orders and un-posted labour all distort it.
• It goes stale. By the time the numbers are compiled, the position has moved on.
• It is hard to compare across jobs when each one is built in its own spreadsheet, a slightly different way.

Most of these disadvantages come from the manual process around the CVR rather than the method itself.

The quantity surveyor or commercial manager on the job owns it. They pull value from the valuation, cost from accounts and buying, and progress and cost-to-complete input from the site or project manager. A commercial director or managing director reviews it, and finance takes the results into the management accounts. In a smaller subcontractor that can be two people, or one owner doing it in the evening.

Monthly is the norm, and it follows the payment cycle. Under the Construction Act (section 109), a party to a construction contract is entitled to interim or periodic payments unless the work is to last less than 45 days, and standard forms commonly run on monthly valuations. Since you are assessing value every month anyway, that is when you reconcile it against cost.

Short jobs may only need a reconciliation at completion. High-risk jobs, or ones already showing erosion, are worth a lighter weekly cost check between the monthly CVRs.

For most contractors, the CVR is where the revenue and profit figures in the management accounts come from on long-running jobs. That link has become more formal. The revised FRS 102 applies to accounting periods beginning on or after 1 January 2026, and it replaces the old revenue section with a five-step model in line with IFRS 15. BDO notes that revenue on long-term contracts is still generally recognised over the contract period, but the method chosen can change how margin shows up month to month. Grant Thornton points out that where the unavoidable costs of a contract exceed the expected benefits, a provision must be recognised. In practice, that means a loss forecast in your CVR should reach the accounts straight away rather than at the final account.

How this applies to your contracts is a question for your accountant. A reliable monthly CVR makes their job, and your year-end, much easier.

Most UK CVRs live in Excel, and for good reason. Every QS can read one, it bends to how you treat prelims and uncertified work, and it costs nothing. For one or two live jobs with a handful of subcontractors, a well-built spreadsheet is the right tool.

If you are building or fixing a CVR spreadsheet, start with our guide to cost value reconciliation templates in Excel. It sets out the six blocks a good template needs, the accrual formula, and where a spreadsheet stops coping.

The strain shows as the number of live jobs grows. Each month someone re-keys the ledger, chases orders to work out accruals, copies the valuation in and rebuilds the portfolio summary by hand. Broadly there are two ways out:

• A construction platform with a CVR module. This works well if you are prepared to run your jobs the way the platform models a contract. Some firms end up exporting back to Excel because the platform's view does not match how they treat cost and value.
• Connect what you already use. Pull cost from your accounts package, commitments from your ordering and value from your valuations into a live commercial report built around your own cost heads and rules. The QS then spends the month on judgement, not transcription.

The second route is what we build at Streamlined Analytics. Our article on construction reporting software explains the approach, and our data analytics and dashboards page covers how we work. If your monthly CVR has become a rebuild rather than a review, book a call and we will look at where the time goes on your own numbers. Builds start from £3,000 (see pricing). If you only run a couple of jobs at a time, keep the spreadsheet.