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Budget, Traceability and Control: What Constructors Can Learn From the Aviation Industry

Preventing Disputes Through Effective Cost Control

In the global construction industry, multi-million dollar disputes and arbitrations related to cost overruns, time extensions and contractual changes can jeopardize the financial viability of projects, the continued operability and the good reputation of the parties involved. One example of this is the Big Dig project, in the United States, where companies Bechtel Corporation and Parsons Brinckerhoff (now WSP USA) reached an agreement to pay the government USD$407 million in damages for delays, while other companies that were involved would pay an additional USD$51 million.¹ In Colombia, the Cartagena Refinery (Reficar) tribunal ordered the contractor CB&I to pay more than USD$1 billion to Ecopetrol.² Cases like these demonstrate the importance of having, from the beginning, a cost control system that not only fulfills an operational function, but also contributes strategically to the prevention and management of disputes.

If structured correctly from the beginning, one critical component of project management can make the difference between an efficient operation and lengthy litigation: cost control. Its goal is not just to keep track of money spent. When designed correctly, cost control is a prevention tool, a strategic tool, and, above all, an anticipation tool.

Cost control transcends basic accounting because when technical and financial decisions are clearly documented in a timely manner, many disputes are either strengthened, weakened, or avoided based on the clarity of recordkeeping evidence. Wouldn’t it be better if we were to look at cost control as a way of preventing problems rather than simply fulfilling financial requirements?

Talking about cost control is not just checking numbers. We are talking about creating a precise and verifiable storyline of what happened on the project. This is where a key word comes into play: traceability.

A real-world scenario from the construction industry: a company and its client mutually agree to accelerate project activities to meet a new completion date. This decision must be formalized through client instruction. However, if acceleration costs are not assigned to specific cost centers through formal approvals, then it is hard to justify their legitimacy or mitigate potential disputes that could arise during contractual closure. Ultimately, in this situation, maintaining traceability is absolutely vital, as it can mean the difference between presenting a well-argued case that recovers the cost overrun, or confronting an unclear dispute.

This type of record serves to clearly demonstrate the cause-and-effect relationship: the need to accelerate the project (cause) generates a justified overrun (effect). Thus, when a claim is made, it’s not just about saying that there was a cost overrun, but about proving why it occurred and how it was directly related to a specific technical choice that was made.

A well-structured cost system allows not only the anticipation of deviations, but also provides clear evidence on whether a cost overrun in fact existed, was foreseeable, justifiable, or attributable. This evidence is the link between good management and effective dispute resolution. In addition, this type of system generates a synergy between the teams involved: those who control the budget and those who allocate resources. By centralizing information and avoiding redundant effort with automated links in the flow of information, operational efficiency is improved and technical decisions become directly visible to the financial management of projects.

From a technical perspective, there is an opportunity that goes beyond automating or digitizing processes: transforming cost control into a strategic protection tool. Imagine an infrastructure project like a commercial plane flight. From takeoff to landing, everything is recorded in a black box. This black box not only serves to investigate accidents but also to understand the entire journey and anticipate future risks.

Cost control works the same way. It’s the construction industry’s black box. And for it to be useful, it must be well-configured from the moment the project “takes off”. Specialized digital tools for cost control allow project managers to configure that black box to not only capture data but also tell the complete story of the project in real-time.

In practice, this materializes in several levels. The cost breakdown structure functions like a digital flight plan, where each budget item is traced from its origin. This allows precise tracking of when and why a deviation occurred, if there is one. Moreover, these tools make it possible to dynamically compare the original budget with the new activities executed, showing when the project deviated from the plan and what the reasons were behind those deviations.

And perhaps the most powerful incentive for cost control is that the system acts like a digital control tower. Each change request, approval, and supporting evidence is recorded with date, author, and comments. This traceability converts each decision into a technical, legal, and financial line of defense.

Reconsider the case of the construction company that agrees with the client to accelerate its activities. To achieve this, the company implements night shifts and additional teams are hired to maintain the project’s continuity over 18-hour days. With this input, a complete analysis is made, including time, additional resources required, and the cost-benefit of implementing measures such as night shifts. This found that the acceleration strategy would generate additional costs, which were formally approved by the client. From that moment on, a rigorous follow-up was activated from the control system. With a well-structured cost system, each change was documented with its respective technical justification, formal approval, and financial traceability. Expenses related to night shifts were linked to specific cost centers and directly related to the event that motivated the decision: the need to meet a new completion date.

In addition, the integration between approved changes and the control system allowed for an updated project forecast, identifying how these decisions impacted the estimated final cost. This information gave management an opportunity to control the situation ahead of time, reducing financial risks and improving agility in responding to new situations.

A high degree of traceability allows the company to demonstrate with precision why the cost overrun was incurred, how the acceleration strategy was carried out, and under what conditions it was approved. This information didn’t just back up the technical team’s decisions, it also helped to build the project’s financial defense in advance. In other words, and returning to the metaphor of the airplane flight, the system served as a black box that protected the project from its own operation, turning a potential source of dispute into a case of responsible management.

Integrating technological skills and risk management through cost control strengthens a single front: the project’s financial defense. The use of centralized data and automated flows allow the teams that execute expenses and those that control the budget to operate in synergy with a shared vision, minimizing wasted effort. The information is accessible and transparent for all stakeholders, which strengthens trust and facilitates collaborative monitoring. Deviations are detected before they escalate into conflicts, a common language is built between technical, legal, and financial aspects, and clear evidence is generated to support any claim.

A well-structured cost system is not just a backup for contractual defense; it’s a fundamental practice that strengthens the project from its conception, because it facilitates scenario planning, risk evaluation, and informed decision-making. Integrating cost analysis with centralized data management enables preventive responses that can reduce the likelihood of disputes.

A well-designed system also delivers clear competitive benefits: it enables proactive analysis of financial scenarios, optimizes decisions on future internal investments, and improves the ability to respond to market fluctuations. Traceability becomes not only a compliance tool but a strategic enabler that enhances business efficiency and resilience.

Footnotes:

1: Goodnough, Abby. Bid Dig Suit Settled for More Than$400 Million. January 24, 2008.

2: Clavijo, Leidy Julieth Ruiz. Corte de Nueva York falló a favor de Reficar tras disputa con Chicago Bridge & Iron. January 17, 2025.