Committed cost meaning in construction

Committed cost sits between the budget and actual spend. The moment a purchase order for steel or a work order for plastering is approved, that money is spoken for, even though the material has not arrived and no bill has come in. The same applies to a subcontractor rate agreed for the whole scope.

Watching only actual cost gives a false sense of comfort, because large orders show up as spend weeks later. Budget minus actual minus committed tells you what is really left to spend on each cost code. That is the figure a project manager should check before approving the next order.

Committed cost moves to actual as goods are received and bills are certified. If an order is cancelled or closed short, the unused commitment should be released so the figure stays honest. Review open orders monthly; old, half-delivered POs are the usual source of a committed figure that nobody trusts.