Contract value and internal budget

Contract value and internal budget describe different aspects of the same work. Contract value represents the client price; internal budget represents the estimate used to plan and manage delivery. They can be equal, but they do not have to be.

Contract value records the amount associated with the work you have agreed to deliver. It provides the commercial basis for fixed-fee progress claims. Time-and-materials billing follows the applicable time and expense charges. Check whether a T&M cap applies; time-and-materials billing does not always mean uncapped billing.

The internal budget is built from the task’s pricing and estimates, including resource and expense entries where present. It gives your team a baseline for planning the work.

It is not necessarily the organisation’s payroll cost, and it is not the actual amount already spent. The rates used in the estimate determine what its monetary value represents. Actual time and recorded costs are tracked separately as work progresses.

A task can have a resource estimate and a separately set client price. For example, an internal estimate of $8,000 and a client price of $10,000 leave a $2,000 difference. Drum displays the difference between contract value and budget as Buffer.

That buffer is a pricing difference, not automatically profit or free capacity. Actual delivery costs, changes in scope and the basis of the estimate still matter.

A cost-to-complete estimate forecasts what is required to finish the remaining work. It answers a different question from either the original budget or the amount left to invoice.

Variations record changes to the project. External variations can change the client contract; internal variations record internal adjustments without changing the contract value. Their effects depend on approval and the changes recorded.

How project budgets are built in Drum explains how task pricing and estimates build the project totals.