Construction markets worldwide continue to face rising costs and price volatility. Material prices, freight and energy costs, labour availability, and tariff conditions can shift faster than contractors can secure procurement.
Turner & Townsend estimate that construction cost inflation will be around 3.9% in 2025 across key markets, though rates vary significantly by region and sector. McKinsey data shows that annual cost increases of 1–3% have become common due to supply-chain disruption and labour productivity constraints.
These shifts reduce the reliability of pre-tender pricing and weaken Bills of Quantities (BoQ) rate assumptions. They can also increase the risk of cost escalations and contractual claims during delivery.
Quantity surveyors (QS) feel this pressure daily. They must keep estimates current, review procurement pricing, and monitor commercial risk as conditions evolve.
Contract structure and payment terms define where risk sits on paper, but operational responsibility for managing it often falls on QS-led teams. When prices change during tendering or construction, cash-flow forecasts, interim valuations, and cost-to-complete (CTC) projections — become harder to maintain, as cost exposure grows.
This article explains the main causes of cost uncertainty in construction — and how they impact cost estimates, BoQs, budget baselines, procurement decisions, and contract administration. It also explores the effect on commercial performance, including variations and final account.
Throughout the article, readers will find clear guidance on how to strengthen financial control with better risk planning, early supplier engagement, and structured commercial processes.
Finally, the article highlights how digital quantity takeoff, e-procurement, and cost management solutions support quantity surveying workflows. These tools can improve financial visibility, speed up decisions, and help reduce cost uncertainty — even when market prices change rapidly.
Table of Contents
1. Cost Uncertainty in Construction Project Estimation and Budget Baselines
Accurate project estimation is the foundation of every construction budget. Yet, cost uncertainty can make this foundation unstable from the start.
Quantity surveyors develop cost baselines based on available data — but these can become inaccurate within weeks as market conditions shift, driving changes in material prices, labour rates, and subcontractor quotes.
Modern construction cost management now relies on dynamic forecasting rather than static estimates. To maintain budget accuracy, QS teams update rates continuously using market benchmarking along with current supplier and subcontractor pricing trends. Without these updates, early estimates often understate the true cost of construction — leading to revalidated budgets and tender delays.
The biggest challenge is timing — by the time tenders are submitted, original assumptions may already be outdated. Even small deviations in key commodities like steel, concrete, and fuel can erode estimate accuracy and increase budget pressure later in delivery. Establishing flexible cost baselines — supported by well-sized contingencies and robust price-escalation provisions — helps limit exposure to this volatility.
Read also: Navigating the World of Construction Quantity Surveyor
2. Impact of Material Prices, Labour Rates, and Subcontractor Quotes on Cost Control
Effective cost control depends on monitoring pricing in real time and maintaining clear contractual risk allocation. When the prices of materials, labour, and subcontracted work fluctuate, even small changes can disrupt the project budget.
Steel, concrete, and fuel remain the most sensitive cost drivers — influenced by global commodity rates, as well as freight and energy prices. Labour shortages and wage competition also add pressure, especially within specialist trades, and in fast-growing or remote regions.
These fluctuations directly affect how QSs maintain control — forcing real-time tracking of every package and adjustment of forecasts as conditions change. On most projects, subcontractor packages make up the majority of construction costs — meaning any shift in their pricing has an immediate impact on overall cost control.
Subcontractors’ quotes reflect current market conditions and can diverge from rates used during pre-tender estimation. If subcontractors experience procurement delays or labour inefficiencies on site, they may seek rate revisions or formal claims — depending, of course, on contract form (lump sum, remeasure, cost-plus; NEC / JCT / FIDIC in some regions). This can shift commercial risk or cost exposure from them to the main contractor, or ultimately to the project owner.
Quantity surveyors must identify pricing shifts early and monitor cost exposure as it evolves.
Effective cost control means tracking current commitments against budget through structured reporting — like monthly cost reports, CTC forecasts, and interim valuation checks — validating market rate movements and any rate revisions, and addressing deviations before they escalate. Strengthening supply chain engagement helps reduce the impact of price volatility:
- Securing critical work packages earlier
- Maintaining competitive tendering options
- Using benchmarked rate databases
- Market testing high-risk items
Without proactive oversight, price movements can quickly exhaust contingencies and put project budgets at risk.
Read also: Tips to Improve Construction Cost Management
3. Bills of Quantities and Market-Driven Rate Instability
Bills of Quantities (BoQ or BQ) provide the structured basis for pricing construction work and enable consistent comparison of contractor and subcontractor rates.
Quantity surveyors prepare and manage the BoQ, breaking the scope into measurable items that form the pricing basis during tender submission. But even the most accurate BoQ cannot maintain cost certainty if market conditions change after prices have been submitted and locked into the bid.
Rates that were competitive during tendering may no longer reflect the actual prices contractors must pay for labour, materials, and specialist subcontractors once subcontract packages are awarded (let).
Quantity surveyors use the BoQ to track and update cost exposure item by item. When market prices rise, unit rates must be validated against current quotations or rate build-ups — especially for high-risk cost areas. These areas include volatile material categories like steel and concrete, as well as specialist subcontract scopes such as elevators and complex MEP installations.
Market pricing can shift due to changes in supplier availability, material lead times, and specialist labour capacity. Without regular updates, cost baselines become misaligned with live pricing and cost pressure builds in the budget — affecting interim valuations, variation assessments, and the final account settlement.
Maintaining BoQ accuracy means treating it as a live commercial document throughout delivery. Ongoing market testing, benchmarking against historical data, and regular supplier price checks help keep pricing aligned with current market rates and availability.
Strong cost reporting based on BoQ item-level breakdowns improves visibility, giving project teams time to protect contingencies and prevent cost overruns from materialising later in the project.
4. Construction Risk Allocation and Procurement Strategy Under Price Volatility (JCT / FIDIC / NEC)
Contract strategy determines who carries the financial risk when material prices or labour rates increase.
Under volatile market conditions, the choice of contract form and procurement route has a major impact on budget certainty, risk exposure, and dispute likelihood. Many JCT and FIDIC contracts are awarded (let) on a lump-sum basis, but both frameworks allow fluctuation (price-adjustment) options and remeasurement forms — without these, more cost risk sits with the contractor.
NEC offers risk-sharing via target-cost options (C/D) with pain/gain share and formal Early Warning Notices as well as change-control processes — although it demands disciplined commercial management to work.
Procurement strategy also influences cost stability. Traditional lump-sum tendering can give initial price certainty, but if market conditions shift and no fluctuation provisions exist, disputes often follow after award. Two-stage tendering or framework agreements allow earlier subcontractor involvement and more realistic pricing — reducing the gap between estimates and final contract costs.
Longer-term supplier agreements can lock prices and lead times earlier, stabilising procurement and reducing delay risk.
Quantity surveyors play a central role in aligning contract conditions with market risk, using:
- Fluctuation (price-adjustment) provisions for labour and materials
- Prime-cost sums for specified items
- Provisional sums for genuinely undefined scope
- Transparent variation procedures
- Index-linked adjustments
These mechanisms require clear price-adjustment rules. Like defining which cost indices apply, their trigger thresholds, and the rate-adjustment method. That way inflation risk is shared fairly rather than falling entirely on one party.
The right procurement route protects project budgets at tender and throughout delivery.
Read more: Construction Tendering Explained: Procurement, Bids, RFQ, Automation and More
5. Contingency Planning and Cost-Risk Mitigation in Construction Estimation
In construction budgeting, contingencies are an essential safeguard against market volatility.
Even when estimates are detailed and based on current data, price movements in steel, concrete, freight, and labour can push actual costs beyond planned limits. A well-structured contingency allowance accounts for known risks such as procurement delays, productivity changes, and design development, as well as unpredictable market shifts that cannot be fully costed at tender stage.
Quantity surveyors must regularly reassess contingency levels as market conditions evolve. If the BoQ includes high-risk materials or specialist trades, well-defined provisional sums give teams flexibility to manage changes without immediately eroding the core budget.
Escalation clauses linked to recognised cost indices — such as steel and labour indices — help adjust prices fairly and reduce disputes over price increases. Risk registers help identify and track where cost shocks are most likely to occur, while quantity surveyors’ judgement and data analysis determine the scale of exposure.
Market signals and supplier feedback allow QSs to update forecasts before new commitments are made. When supported by up-to-date procurement and cost data, contingency planning shifts from a fixed percentage to a dynamic risk mitigation tool — supporting cost certainty despite market movement.
Read also: Construction Contingency: All You Need to Know
6. Variation Pricing, Contract Administration, and Claims Prevention in Construction
Variation — also known as a change order — is a normal part of construction as design refinements, unexpected site conditions, and scope adjustments can happen at any stage. But when cost uncertainty is high, even minor changes can create major commercial impact.
Price shifts in materials or labour can turn a standard variation into a dispute, if re-pricing is required because contract valuation rules no longer align with current market conditions. This puts pressure on quantity surveyors to validate and reprice each variation with transparency — using BoQ references, live quotations, and clear productivity evidence where applicable.
Strong contract administration is essential to maintain commercial control. Defined notification, approval, and pricing procedures keep all stakeholders — project owners, contractors, and subcontractors — aligned.
When unit rates in the BoQ no longer reflect actual market costs, quantity surveyors must reference updated supplier quotations, benchmarked data, or index-based adjustments to maintain fairness. They also need to ensure that cost forecasts reflect changes in procurement pricing, subcontractor claims, and labour or productivity impacts, where evidenced. Delays in instructions or agreement of commercial terms increase financial exposure on both sides.
Proactive claims prevention is more efficient than resolving them later. Regular coordination with design, procurement, and site teams ensures commercial risks are identified early. It also helps maintain contractual entitlement and reduce dispute risk — through Early Warning notices under NEC and timely change notifications under JCT and FIDIC.
Effective change order management protects project budgets, maintains commercial relationships, and reduces final account uncertainty.
7. Construction Cash Flow Exposure, Interim Valuations, and Cost-to-Complete Accuracy
Cash flow determines whether a construction project can progress without interruption.
When prices rise unexpectedly, contractors may face higher upfront procurement costs while payment terms do not adjust at the same pace. This creates cash-flow exposure risks — money leaves the project faster than it comes in.
Quantity surveyors monitor project inflows and outflows through interim valuations and Applications for Payment (AFP), ensuring completed works and approved materials are valued and certified correctly.
Cost-to-complete (CTC) forecasts become more difficult when market conditions shift. If material orders are delayed or re-priced, the CTC may exceed the remaining project budget.
Quantity surveyors must continuously reconcile cost-to-complete data with procurement commitments and site progress — reflecting current supplier quotes, labour productivity, and subcontractor claims. Inaccurate forecasting can lead to funding gaps, late payments to subcontractors, and increased insolvency risk along the supply chain.
Commercial governance plays a central role in maintaining financial stability. Robust reporting of committed costs, approved variations, risk allowances, and cash flow constraints, such as retention levels help stakeholders understand true cost exposure at every stage.
Early visibility enables corrective action — resequencing work, accelerating key procurements, or renegotiating commercial terms. Quantity-tracking tools support more accurate valuations as design and scope evolve.
In volatile conditions, cash flow liquidity determines whether the project can sustain operations without disruption.
8. Digital Takeoff, E-Procurement and Cost Management Integration
Digital tools are now essential for maintaining cost accuracy throughout construction. Manual takeoff and disconnected spreadsheets can’t keep up with rapid changes in material pricing and lead times.
Digital quantity takeoff keeps measurements aligned with the latest design revisions, reducing errors and allowing quantity surveyors to verify the cost impacts in real time.
E-procurement systems further strengthen cost control by digitising supplier sourcing and tender management — connecting BoQ items to real-time supplier quotations, benchmarked rates, and procurement status. When integrated with cost management solutions, like Bauwise, these systems provide end-to-end visibility of commitments, delivery dates, and contract terms within a single centralised environment.
They also support tender-stage comparisons of subcontractor pricing and standardised bid evaluations, enabling faster, evidence-based commercial decisions. Integrating ERP and accounting software into cost management platforms further enhances cost control and overall project governance. With synced data, teams gain real-time visibility of committed versus remaining budgets.
Better data flow strengthens negotiations, accelerates approvals, and improves forecasting accuracy — reducing cost and commercial uncertainty during both tendering and delivery. The result is proactive cost control, rather than reactive correction once overruns emerge.
9. Forecasting, Reporting, and Financial Visibility Across the Construction Project Lifecycle
Cost forecasting is not a one-time exercise — it must evolve throughout the project.
Quantity surveyors update forecasts by comparing committed costs against the remaining budget and revising cost-to-complete (CTC) projections based on current rates and labour productivity impacts. This ongoing cost control helps prevent financial surprises late in the project.
Clear commercial reporting supports faster decision-making. Stakeholders need reliable insight into the project’s financial position — including approved variations, pending claims, procurement risks, risk allowances, and remaining contingency.
When reporting is delayed or based on outdated information, financial exposure increases and corrective actions come too late to be able to protect the budget. Accurate reporting also strengthens trust between project owners, contractors, and supply chain partners.
Forecasting becomes more powerful when synced with live purchase orders (POs), procurement, and contract data. Early warnings from suppliers, updated labour productivity data, or lead-time changes allow QS and commercial teams to adjust forecasts before risks escalate.
Modern forecasting tools translate real time procurement and contract data into forward-looking cost scenarios — showing how cost changes influence cash flow projections and final account outcomes. With this level of visibility, teams can act early to protect margins and budget integrity.
10. Best Practices to Improve Construction Cost Certainty in Volatile Market Conditions
Improving cost certainty requires both early action and fast response as market prices change.
Procuring high-risk materials, long-lead equipment, and specialist subcontract packages earlier in the construction programme protects against price escalation and supply delays. Transparent supplier engagement and benchmarked pricing help ensure BoQ rates reflect current market reality.
Commercial discipline is equally important. Formal change-control processes — clear notification, evaluation, and pricing of variations — reduce the likelihood of disputes and unplanned budget movement.
Stakeholders need continuous visibility of where cost exposure exists, not only at formal reporting milestones but throughout delivery, so that risks can be corrected before they turn into commercial claims.
To sustain that visibility, leading QS and commercial teams standardise three practices:
• Early procurement alignment across design and supply chain teams
• Real-time cost and commitment tracking through integrated cost platforms
• Regular forecast reviews and commercial health checks tied to programme milestones
With disciplined processes and connected data, QS and commercial teams can protect cash flow, improve final account outcomes, and maintain budget reliability — even when price volatility challenges the original plan.
Conclusion: Tackle Construction Cost Uncertainty With Reliable Data and Commercial Discipline
Cost uncertainty is a constant in construction — an everyday reality for quantity surveying and commercial teams that must be actively managed. Projects must continue to progress even as market prices shift.
Quantity surveyors, as key figures in project delivery, safeguard financial stability through commercial discipline — applying accurate cost forecasting, informed procurement, timely variation management, and contingencies sized to real project risks. But is discipline alone enough to stay ahead of cost volatility?
While cost certainty is never guaranteed, it can be reinforced through control — which, in addition to disciplined processes, depends on accurate, real-time cost visibility. Digital cost management enables that visibility by connecting forecasting, procurement, and contract administration data into one centralized environment.
With the right systems and structure in place, teams can anticipate change instead of reacting to it — sustaining financial liquidity and operational continuity, minimizing disputes, and protecting financial outcomes across the project lifecycle.
Organisations that combine discipline and visibility deliver with confidence, even when the market refuses to stand still.
About the Author
Mikk Ilumaa
Mikk Ilumaa is the CEO of Bauwise, a leader in construction financial management software with over ten years of experience in the construction software industry. At the helm of Bauwise, Mikk leverages his extensive background in developing construction management solutions to drive innovation and efficiency. His commitment to enhancing the construction process through technology makes him a pivotal figure in the industry, guiding Bauwise toward setting new standards in construction financial management. View profile
