cost-value reconciliation (CVR)group1

Cost-value reconciliation (CVR) brings together the established totals for cost andvalue to illustrate the profitability of a company

The CVR serves two purposes

it forms the basis of statutory accounts

provides management information to assist in the identification of problems, the needfor reserves, the reasons for loss and information to prevent repetition of such losses

At each interim valuation date, normally the end of each calendar month, the totalcosts to date are compared with the total valuation.

The cost-value comparison, or reconciliation, is usually completed by thecontractor’s QS

starting point of any CVR must always be the gross certified value

Adjustments

adjustments for external preliminaries claimed in valuations against the internalpreliminary schedule;

adjustments for elements included within costing but not in the external valuation, forexample, materials brought to site on the same day as the valuation but after materialson site were recorded

items of over measurement not picked up by the client’s QS

any adjustments necessary to bring the cost cut-off date and the on-site valuation datetogether

variations which have not been agreed with the client’s QS

contractual claims for loss and/or expense which have not been agreed by the client’s QS

possibility of liquidated damages being charged by the employer

provision should be made for future known losses

Once the gross adjusted valuation has been assessed three further elements arededucted from the figure to arrive at a final residual value or margin

First, subcontract liabilities which should cover all disciplines of subcontractor,

second, snagging and defects which can be subdivided into two sections

Snagging required at the end of the project to achieve handover;

A levy to be used to cover for costs that may be incurred in the making good of defects periodbefore the certificate of making good of defects is issued.

The third and final element of deduction is that of the main contractor’s core costs, thatis, labour, material and plant and other associated costs. In general, these will be supplied tothe contractor’s QS by a separate cost department within the contractor’s company

The residue is the profit generated from the main contractor’s works section of theproject. When added to the profit on other sections, that is, the subcontract liabilityschedule, this indicates the profit to date for the project.

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