Project-wise costing and margin for solar EPC: estimated, committed and actual
Company-level profit hides project-level losses. Three costs per project, three margins, and the weekly view that turns margin from an after-the-fact number into a steering wheel.
- Three costs: estimated, committed, actual. Three margins: quoted, forecast, final.
- Forecast margin, estimated cost minus committed cost to date, is the live steering number.
- Everything needs a project ID: purchases, labour, subcontractors, logistics, fees.
- Pick an overhead allocation rule and apply it the same way every time.
- Unallocated cost is the leak. The goal is zero cost without a project.
Quick answer
Track three costs for every project: estimated (the quote), committed (purchase orders and booked labour) and actual (invoiced and paid). From them you get three margins: quoted, forecast and final. Review forecast margin weekly. A project is a cost centre with a budget, so every purchase, labour day and subcontractor bill must carry its project ID, and overhead needs a stated allocation rule.
Why is company-level profit not enough?
Because profit on a good project can cover the loss on a bad one, and you never learn which was which. At month end the books say the company made money. They do not say that the four C&I jobs with structural work made 6% while the residential jobs made 18%. Project-wise costing is how you find that out, early enough to change the next quote.
What are the three costs?
| Cost | Definition | Source | When you know it |
|---|---|---|---|
| Estimated | The cost the quote was built on | Quote BOM and labour plan | At contract |
| Committed | Orders and labour promised, not yet fully paid | Purchase orders, work orders, booked days | Throughout the project |
| Actual | Invoiced and paid | Supplier bills, payroll, expense claims | As bills arrive, final at close |
Most companies only see actual, and late. Committed is the one that gives you time to act.
What are the three margins?
Costs feed margins
- Quoted margin = contract value minus estimated cost.
- Forecast margin = contract value minus (committed cost to date plus estimated cost of the remaining work).
- Final margin = contract value minus actual cost at close.
If forecast margin drops below quoted margin, find out why that week.
What does a cost breakdown look like?
An illustrative breakdown with assumed shares for a C&I rooftop project. These are not benchmarks. Your own history is the only number that counts.
Illustrative cost structure for a C&I rooftop job (% of project cost, assumed)
Source: Assumed shares for illustration only; not industry data. Replace with your own project history.
View data
| Share | |
|---|---|
| Modules | 38% |
| Inverters | 12% |
| Structure and BOS | 18% |
| Labour | 14% |
| Logistics | 4% |
| Approvals and fees | 3% |
| Warranty provision | 2% |
| Allocated overhead | 9% |
The point of the buckets is the discipline: each purchase and each labour day is coded to a bucket and a project. When a bucket overruns, you see which one.
What must be true for this to work?
- Every cost carries a project ID. A purchase with no project is unallocated, and unallocated cost is where margin vanishes.
- Labour is booked to projects daily. Even a simple attendance-by-site log works.
- Subcontractor work orders are raised before work starts, so commitment is visible.
- Changes are priced. Every scope or BOM change has a cost and a decision on who bears it. See overruns.
- Overhead uses one rule. For example a fixed percentage of project cost, or a rate per kW. State it and apply it the same way every time.
What does the weekly review look like?
One table, one page: project, contract value, estimated cost, committed cost to date, estimated remaining, forecast margin, quoted margin, difference. Sort by difference. The three worst are the agenda.
Where does this not apply?
If your business is a single-person installer, a simple per-job profit note is enough. Formal project costing earns its keep with several concurrent projects, several buyers, subcontractors, or mixed project types where average margin hides the spread.
What to do this week
- Choose your overhead rule and write it down.
- For three live projects, compute forecast margin from purchase orders and booked labour.
- Add a mandatory project ID field to every purchase and expense form.
Part of the guide Running a solar EPC business on connected systems.
The cost and margin definitions are standard project-accounting ideas applied to solar EPC, expressed as our own operating model. The donut shares are assumed for illustration (they sum to 100: 38+12+18+14+4+3+2+9) and are not industry data.
More by GarunaCDX
Let's talk about your build.
Tell us what you are building. A founding engineer replies within one working day with how we would approach it.
