The sensitivity table: what the pool becomes if open items land either way

Ask a contractor what the savings will be and you get a number. Ask what the number depends on and you get a list: the pending change orders, the allowances not yet reconciled, the packages not yet bought, the contingency not yet drawn. Each item on that list can land in more than one place. The number is the contractor's best guess at where they all land together.

A sensitivity table shows the guess and the alternatives side by side. It is the most useful page an owner can bring to a board that wants to know whether the savings figure is real.

What goes in the table

Start with the projected pool as of today: final GMP to date, less cost to date and the contractor's estimate to complete. Then list every open item that could move it by more than a threshold the owner sets. For each item, write the low outcome, the expected outcome and the high outcome in dollars, and note which way each one moves the pool.

Open items usually fall into four groups. Pending change orders, where the question is whether they will be approved and at what value, and whether they raise the GMP or draw contingency. Open allowances, where the question is where reconciliation lands within the band. Unbought packages, where the question is the award against the carried value. And remaining contingency, where the question is how much of it is drawn before closeout.

Reading the columns

The table has three totals. The favorable column sums every item at its best outcome for the pool. The expected column sums the midpoints. The adverse column sums the worst outcomes. The spread between favorable and adverse is the range the owner should report. The expected figure is what most people will remember, so the owner should say the range out loud.

A fictional illustration: a $52 million courthouse has a projected pool of $700,000 in month fifteen. Open items are a $250,000 pending change order that may be owner scope or design gap, two allowances with a combined band of minus $50,000 to plus $200,000, one unbought package with a $100,000 swing, and $300,000 of contingency with a history of full draw by closeout. The favorable column reaches $1.1 million. The adverse column is just under $100,000. The expected figure is the $700,000 the contractor reported, and it is the middle of a wide range.

The cause column

For pending change orders, add a column for cause. A change classified as owner scope raises the GMP and leaves the pool unchanged. The same change classified as contractor coordination is paid from contingency and reduces the pool. The table should show both outcomes, because the classification is often the single decision that moves the pool most, and it is a decision the owner participates in.

How the table changes month to month

Items close. A change order is executed, an allowance is reconciled, a package is bought. Each closed item moves from the open list to the known figures, and the range narrows. Over the life of a project the table should shrink from many rows and a wide spread to a handful of rows and a narrow one. If the spread is not narrowing, items are not closing, and that is its own flag.

Keeping a copy of the table each month shows the board the trajectory, which is more persuasive than any single month's figure. A table that has narrowed from a $1 million spread to $200,000 over six months says the project is converging. One that has stayed wide says something is stuck.

Building it without rebuilding it

Owners who keep the table in a spreadsheet rebuild it every month from the pay application, the change order log and the contractor's report. That works and it is slow, and the rebuild is where errors enter. The alternative is to keep the open items in a ledger where each one already carries its low, expected and high value, and let the table be a view of that ledger.

Costwitness produces the sensitivity table from the open change orders, allowances and packages already in the owner's ledger, applying the savings split, cap and carve outs to each column. The software sums the columns. The low and high values on each item, and the cause on each change, are the owner's judgment.

In the product

Shared savings, Anticipated final cost, Change order register. Free tool: Shared Savings Calculator, Change Order Exposure.

Keep reading

Earlier: How allowance overruns eat the savings pool. Later: Split percentages, caps and carve outs in shared savings. All articles on buyout and shared savings.