Pro Forma
A financial model a developer builds that projects a project's full costs against its expected income, rent, lease payments, or resale value, over several years, to decide whether a project is financially worth building in the first place.
Why it matters
A pro forma is built before a construction budget even exists, and it answers a different question than a construction budget does. A construction budget asks what it costs to build something. A pro forma asks whether building it will actually make money once it's standing and operating, which is the real test a project has to pass during feasibility.
On a real project
A developer evaluating a new apartment building builds a pro forma projecting twenty years of rental income against the land cost, construction cost, financing cost, and ongoing operating expenses, and only moves forward once the projected return clears the developer's minimum threshold.
Who this matters most to
An Owner's Representative often reviews a project's pro forma against the actual construction budget as design develops, to flag early if real costs are drifting away from what feasibility assumed.
Where this goes wrong
A pro forma built during early feasibility assumes a construction cost based on a rough square-footage number, without any real estimate behind it. Once actual bids come in well above that assumption, the project's projected return falls apart, and the financing that was already lined up no longer covers the real cost.