The cash flow S curve: planned against certified, with a forecast
At the start of most GMP contracts the contractor submits a projected cash flow: how much they expect to bill each month from notice to proceed to final payment. Plotted cumulatively it forms an S, slow at the start during mobilization and foundations, steep through the middle as trades stack up, and flat at the end through punch list and closeout.
That curve is a plan. Each month the certified pay application adds a real point. The distance between the real point and the planned curve is one of the simplest and most useful signals an owner has, and it is routinely left out of the owner's report because the planned curve was filed in month one and never opened again.
Reading the gap
Certified below planned usually means the work is behind schedule, or the plan was optimistic, or both. It is worth asking which, because the answer affects the contractor's general conditions forecast and the owner's financing costs. Certified above planned is harder to read. It can mean the work is ahead, which is good news. It can mean the schedule of values is front loaded and the contractor is billing ahead of progress, which is not. The curve alone cannot distinguish them. Percent complete by schedule against percent complete by cost can.
A fictional $58 million student housing project planned to reach 50 percent of the GMP billed by month twelve. At month twelve, certified is 57 percent and schedule percent complete is 46 percent. The work is slightly behind and the billing is well ahead. That combination deserves a line by line look at the G703.
Adding the forecast line
Two lines show the past. The third shows the future. From the latest certified point, extend a forecast to the anticipated final cost at the expected completion date. The shape of the remaining curve matters: if most of the remaining cost is in mechanical, electrical and finishes, the forecast should stay steep for several months. If the remaining cost is mostly closeout and retainage release, it should flatten.
The forecast line is the one the lender reads. A construction lender funds against a draw schedule, and a forecast that shows the remaining cost exceeding the remaining loan balance is a conversation the owner wants to have early. The same line shows a public owner when bond proceeds will be fully drawn and whether interest earnings assumptions still hold.
Retainage on the curve
Certified and paid are not the same. Retainage held reduces the paid line below the certified line by the retainage rate until it releases. Show both, or label clearly which one is drawn. A lender's draw reconciliation will be based on paid, not certified.
Why the planned curve should be versioned
Contractors revise the cash flow projection. A revised projection is useful and should be accepted. It should not replace the original. If the original curve is overwritten, the owner loses the ability to show the board that the project was planned to be 70 percent billed by now and is at 55 percent. The revised curve will, by construction, show the project on plan.
Keep each version with its date. Plot the original as the baseline and the latest revision as a second planned line. The divergence between them is itself a finding: it shows when the contractor's expectation changed and by how much.
Where the curve sits in the owner's report
The S curve belongs on the pay application page of the monthly report, beside the G702 summary. It is one chart, three or four lines, and a single sentence underneath stating the gap between certified and planned and whether it widened or narrowed this month. Month over month, the chart needs stored points, not recalculated ones, so that a corrected pay application does not silently move a historical point.
Costwitness plots the curve from the certified figures in each monthly snapshot, against the versioned planned cash flow and the forecast drawn from the anticipated final cost. Where certified runs ahead of schedule progress by more than the owner's chosen tolerance, it raises a flag. Whether that is stored material, early procurement, or front loading is a judgment the owner's team makes after reading the G703.
What to do this month
- Find the contractor's original cash flow projection from the GMP submission and plot it cumulatively.
- Add every certified pay application to date as points on the same chart and write down the current gap.
- Ask the contractor for an updated projection, keep it as a separate dated version, and plot both.
- Compare certified percent to schedule percent complete and note any gap wider than a few points.
Questions on this
What is an S curve in construction?
It is the cumulative plot of cost or billing over time. It starts slowly, rises steeply through the middle of the project when most trades are on site, and flattens toward completion. The shape looks like a stretched letter S, which gives it the name.
Should the owner build the S curve from certified or from paid amounts?
Build it from certified, because that is the contractor's statement of earned value, and show paid as a second line net of retainage. The lender will reconcile draws against paid. The owner's cost position is better read from certified.
What if the contractor never submitted a planned cash flow?
Check your contract. Many AIA A133 based agreements require a schedule of values and a construction schedule but do not explicitly require a cash flow projection. Ask for one. A projection derived from the schedule of values and the construction schedule is usually straightforward for the contractor to produce.
In the product
Monthly owner report, Anticipated final cost, GMP baseline. Free tool: Schedule Risk versus Float, Pre-GMP Readiness Score.
Keep reading
Earlier: Over and under billing from the owner's side of the table. Later: The three source spreadsheet: why the owner's monthly position is rebuilt by hand. All articles on owner reporting.
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