Once construction finance is in place, the lender does not simply pay the builder’s invoices. Each month, before any funds are released, an independent quantity surveyor acting for the lender checks what has been built, what has been claimed, and whether the money left in the facility is still enough to finish the project. That last question is answered by the cost to complete, and it is the figure that most often holds up a drawdown. A claim can be accurate for the work on site and still be refused if the remaining budget no longer covers the remaining work. This article explains what a cost to complete report is, what the lender’s QS checks at every drawdown, and how developers and builders can keep payments moving.
What a cost to complete report is
A cost to complete report is the lender’s independent check that a project in progress can still be finished within the funds available. It compares three things: the total forecast cost of the project, the amount already spent and certified, and the amount still undrawn in the facility plus any equity the developer has committed. If the forecast cost of the remaining work is greater than the money left to pay for it, the project is said to be out of balance, and most construction loan agreements stop further drawdowns until the gap is closed.
The report is the ongoing partner to the bank prefunding report prepared before construction starts. The prefunding report establishes the baseline budget, contract and programme. The cost to complete report tracks the project against that baseline every month until practical completion, usually as part of the same document that certifies the builder’s progress claim. In practice the two are often prepared together as a progress claim or drawdown report.
Who the lender’s QS works for
The lender’s quantity surveyor, sometimes called the monitoring QS or the bank’s QS, is usually paid by the developer but acts for the lender. That distinction matters. The QS is not there to agree the builder’s claim, negotiate variations or advise the developer on cost savings. Their job is to give the lender an independent opinion that the money it is about to release matches work actually in place, and that the loan remains secure.
This is why a monitoring QS will sometimes certify less than the builder claimed, or less than the developer expected, even where the developer’s own consultants are satisfied. It is also why a developer who wants advice on their own position, such as assessing a variation or reviewing a builder’s claim before it is paid, generally needs a separate quantity surveyor acting for them.
What the lender’s QS checks at every drawdown
Work in place matches the claim
The starting point is a site inspection. The QS walks the project and assesses, trade by trade, the percentage of each item that is genuinely complete. A builder’s claim is often prepared from the programme or from subcontractor invoices, and both can run ahead of the work on site. Where the claim says the frame is 100 per cent complete and the top level is still being stood, the QS certifies what is there, not what was planned.
The claim follows the contract breakdown
The claim should be built on the same trade breakdown or schedule of values that was agreed at contract and reviewed in the prefunding report. A claim that reshuffles values between trades, or front loads early trades such as preliminaries, demolition and excavation, makes it look as though more value is in place than there is. The QS checks each line against the contract value for that trade and the progress actually achieved.
Variations are approved and fairly valued
Variations are one of the main reasons a claim is reduced. The QS will generally only include a variation that has been instructed in writing, is supported by pricing, and has been accepted by the developer. Unapproved variations, provisional sum adjustments that have not been reconciled, and claims for work that was already in the contract scope are typically excluded until they are resolved.
Materials are on site and fixed
Most lenders fund work that is incorporated into the building. Materials delivered but not yet installed, and especially materials stored off site, are commonly excluded or only included with proof of ownership, insurance and security. A builder who claims a full lift package or façade order on delivery should expect it to be held back until it is installed.
The cost to complete still balances
This is the test that decides whether the drawdown can proceed at all. The QS forecasts the cost of all remaining work, including approved and likely variations, remaining provisional sums, authority and consultant costs still to be paid, and an allowance for risk. That forecast is compared with the undrawn loan plus any developer equity still to be contributed. If the remaining funds are less than the forecast cost to complete, the project is out of balance.
Contingency has not been used up
The QS tracks how much of the original contingency has been spent and how much remains against the work still ahead. A project that has consumed most of its contingency during substructure, with the more complex fitout and services trades still to come, will be flagged even if it currently balances.
The programme is realistic
Time is a cost. The QS compares actual progress with the contract programme and the time remaining on the facility. Delays can lead to extended preliminaries, higher interest and holding costs, and in some cases a completion date that falls outside the loan term. A programme slipping month after month is usually raised with the lender before it becomes a funding problem.
The paperwork supports the payment
Alongside the physical checks, the QS confirms that the claim arithmetic is right: previous payments, retentions, GST and the amount now due. Lenders also commonly require current contract works and public liability insurances, evidence that subcontractors are being paid, and any statutory statements required in the relevant state. Missing documents rarely change the certified value, but they can stop the drawdown being released.
| Check | What the QS looks at | Common reason for a reduced certification |
| Work in place | Site inspection, trade by trade progress | Claim based on programme rather than actual progress |
| Contract breakdown | Each claim line against the agreed trade values | Front loading or values moved between trades |
| Variations | Written instructions, pricing, developer approval | Unapproved or disputed variations included |
| Materials | Installed work, proof of ownership for anything unfixed | Unfixed or off site materials claimed |
| Cost to complete | Forecast remaining cost against undrawn funds and equity | Project out of balance |
| Contingency | Contingency spent against risk still ahead | Contingency exhausted early in the build |
| Programme | Actual progress against programme and loan term | Delays driving up preliminaries and interest |
| Documentation | Claim arithmetic, insurances, subcontractor payment evidence | Missing or expired documents |
This table summarises checks commonly applied by lenders’ quantity surveyors. Individual lenders set their own requirements in the loan agreement, and these should be confirmed for each facility.
What happens when the numbers do not line up
There are two different outcomes, and they are worth separating. The first is a reduced certification. The QS agrees that work has progressed but certifies a lower amount than the builder claimed, usually because of unapproved variations, unfixed materials or progress that is not as advanced as stated. The drawdown still proceeds, the builder is paid the certified amount, and the difference is carried forward to a later claim once it is resolved.
The second is a project out of balance, and it is more serious. Here the problem is not the claim but the budget. Consider a project with a $12 million facility, of which $7 million has been drawn. The undrawn balance is $5 million. If the QS forecasts that the remaining work will cost $5.6 million, there is a $600,000 shortfall. Most loan agreements require the developer to close that gap, typically by injecting further equity, before the lender will fund another dollar. Until it is closed, the builder’s claim may go unpaid regardless of how accurate it is, which puts pressure on the builder, the subcontractors and the programme.
Shortfalls rarely appear in a single month. They build up through variations approved without a funding source, contingency spent faster than planned, and delays that add preliminaries and interest. A monitoring QS who reports a narrowing margin early gives the developer time to respond. One who reports it only when the project tips out of balance leaves very few options.
How to keep drawdowns moving
Most drawdown delays come from the same few causes, and most can be avoided with some discipline on the developer and builder side. Agree the trade breakdown at contract and claim against it every month without reshuffling values. Approve variations in writing as they arise, and decide at the same time how each one will be funded. Hold back claims for unfixed materials unless the lender has agreed to fund them and the documentation is ready. Keep the programme updated so that the QS is not the first to notice a slip.
On the budget side, treat the cost to complete as a live number rather than a monthly surprise. Track contingency drawdown against the work still ahead, not just against the original allowance. Where the margin between undrawn funds and the forecast cost to complete is narrowing, raise it with the lender and line up equity before the project tips out of balance. Finally, submit the claim with everything the QS needs in one package: the claim itself, variation approvals, updated programme, insurances and subcontractor payment evidence. A complete package is usually certified faster than one that has to be chased.
Section 94 prepares bank prefunding reports and monthly progress claim and drawdown reports for lenders, developers and builders across NSW and Victoria. Our AIQS accredited quantity surveyors inspect the work, test the claim against the contract and report the cost to complete clearly, so that lenders can fund with confidence and projects keep moving.
Talk to Section 94 about drawdown reporting for your next construction project.
Frequently asked questions
What is a cost to complete report?
A cost to complete report is a lender’s independent check that a construction project can still be finished with the funds available. It compares the forecast cost of the remaining work with the undrawn loan and any developer equity still to be contributed, and is usually prepared monthly alongside the progress claim certification.
Who pays for the lender’s quantity surveyor?
The developer usually pays the fees, but the quantity surveyor is appointed to act for the lender. Their role is to give the lender an independent opinion on progress and funding, not to represent the developer or the builder.
What does “out of balance” mean on a construction loan?
A project is out of balance when the forecast cost to complete is greater than the undrawn facility plus committed equity. Most loan agreements require the developer to fund the shortfall, often with additional equity, before any further drawdowns are released.
Why did the QS certify less than the builder claimed?
The most common reasons are progress that is less advanced than claimed, unapproved or disputed variations, unfixed or off site materials, and claim values that do not follow the agreed contract breakdown. The difference is usually carried forward and can be claimed again once the issue is resolved.
How often does the lender’s QS inspect the site?
Typically once a month, before each drawdown, although the frequency is set by the loan agreement. Larger or higher risk projects may also have additional inspections at key milestones such as practical completion.