The forecast of how much more the project is expected to cost to complete is called what?

Corecon Financial Terminology and Acronyms Defined

By nat rosasco • 12 Feb, 2018 •

Whether you are new to construction, new to construction software or new to Corecon Technologies, there are phrases, terminology and acronyms that need clarification. At times, these Phrases need to be contrasted from other phrases commonly used. This article attempts to address the most commonly asked questions about Corecon's financial terminology, phrases, words, and acronyms. It is helpful when your teammates use the same terminology and that each understands the definitions. A mutual understanding of this terminology may also reduce frustration, confusion and money. For the purposes of this article, we will use the term “Contractor” to represent your company, which may take the form of a General Contactor, Builder, Subcontractor, or Professional Service provider. Definitions and Acronyms The most common phrases that users ask Corecon to define: Prime Contract: A Prime Contract defines the legal agreement and obligations between the Contractor and the owner , client or customer. Corecon supports four types of Prime Contracts which impact how invoices are processed. These four Prime Contract Types include: Fixed Lump Sum, Cost Plus Without GMP , Cost Plus With GMP , and Unit Price with Billed Quantities. For most companies, there is usually one Prime Contract per project. However, in cases such as a design-build firm, there could be multiple Prime Contracts grouped together under the same Project. Each Prime Contract can document the scope of work, terms, Original Budgets, markups, and conditions. Each Prime Contract under a Project may have a separate Owner/Customer. Project: A Project consists of a group of tasks and objectives that require considerable planning, effort, tracking and coordination. Most Projects in Corecon will contain one Prime Contract. However, some trades group multiple Prime Contracts under one Project. For example, if the Contractor Project is an office building, and the Contractor agrees to individual Prime Contracts with each tenant or for each office space, you may have multiple Prime Contracts under one Project. In Corecon, each Prime Contract grouped together under a Project may have its own Owner, Client or Customer. Owner: This term is frequently used to represent the Project Owner, Property Owner, Client, Customer, and in some cases the Customers Bank or Lender. In other words, an Owner is the person or entity that issues payments to your company as your obligations to the Prime Contract are completed and invoiced. The Owner is usually the person or entity that possesses the property you work on. Guaranteed Maximum Price (GMP): A type of Prime Contract or Subcontract Agreement where the Compensation will not exceed a specified maximum limit. GMP is always associated with a Cost-Plus Contract Type where the Contractor agrees to bill their customers for the actual costs incurred plus an agreed upon Markup or Markups. The total of these actual costs incurred plus markups will not to exceed an agreed maximum or limit. Subcontract (SUB): A Subcontract (or Subcontract Aggreement) defines the legal agrgeement and obligations between the Contractor and the sub-tiered Contractors. This procurement relationship allows the Contractor to assign parts of the Prime Contract to another party. This is especially the case where a Subcontractor possesses the advanced skills,trade and license to perform a specific portion of the Prime Contract. Sucontracts usually obligate the Subcontractor to provide the materials, labor, installation, and related costs to complete that specific skill or trade. A Subcontract varies from a Purchase Order wherein a Purchase Order does not usually include Labor and Installation. In Corecon, a Subcontract is also a commited cost . Unlike a Purchase Order, the Subcontract Agreement can have Retainage or Holdback and the Subcontract Price may be altered by use of Subcontract Change Orders (SCO) . Purchase Order (PO): A legally binding written authorization and procurement document where the Contractor aggrees to acquire goods and services from a Vendor or Supplier. This procurement document establishes the agreed pricing and the terms of the obligation between the Contractor and the Vendor (or Supplier). A Purchase Order obligates and authorizes the Vendor (or Supplier) to deliver the agreed upon goods and services. The Purchase Order also documents the specific types, quanitites and unit prices of the goods and services to be delivered. Usually, the goods and services do not include most Labor and Installation as these are more appropriately documented by a Subcontract. Purchase Orders are a cost control method that in Corecon are also considered a Committed Cost (or Commitment). Committed Cost: The cost control measure that includes the agreed or incurred price between the Contractor and the Vendor. The primary Committed Costs include Subcontracts, Subcontract Change Orders (SCO), Purchase Orders and Anticipated Costs. In Corecon Committed Costs also include booked costs such as approved vendor bills not from PO’s, approved miscellaneous expenses, labor timecards, and equipment time cards. Request For Pricing (RFP): These are formal requests to Vendors, Suppliers, and Subcontractors to solicit their bid price(s) for the materials, services or equipment they offer relevant to the Project designated. In some countries this process is called “tendering”. Others define the acronym RFP to represent “Request for Proposal”. RFP Packages are used to request, track, and analyze pricing on items that will be needed for a project. RFP Packages are typically created for each scope of work (eg. concrete, doors, windows, electrical etc.) that is either subcontracted out or where suppliers will need to provide materials. If the project is awarded, the winning RFP bidder for each package can be issued a PO, Subcontract, or SCO . Corecon provides RFP’s as part of the Estimating or Procurement processes. Corecon also provides a limited version of the RFP (called Vendor Price Request) in the Prime Contract CPR process to solicit pricing from vendors that are affected by the CPR when awarded as a CO . Change Proposal Request (CPR): The means of tracking a potential Claim or Prime Contract change through acceptance or rejection by the Project Owner (Client, Customer). The changes or claims may take the form of changes in conditions, scope of work, services offered, price or schedule and are a request to the Project Owner (Client, Customer) for permission to amend the Original Prime Contract. Although CPRs can be created for all contract types, they are usually entered for fixed lump sum or unit price contracts. Changes to cost plus contracts are generally documented directly in the Change Order (CO) feature and do not require the CPR process. When one or more CPRs are approved, they are rolled into an official CO which will then affect Prime Contract price, schedule and cost budgets. Change Order (CO): A legally binding written authorization and Prime Contract Document where the Contractor agrees with the Project Owner (Client, Customer) to alter the Original Contract because of a change in conditions, scope of work, services offered, price or schedule. This document is used as an amendment to the Original Prime Contract and document a revised Prime Contract Value. The Change Order (CO) may document additions or subtractions to the Price, Scope, and Schedule of the Original Prime Contract. Subcontract Change Order (SCO): A legally binding written authorization and Subcontract Document where the Contractor aggrees with the Subcontractor to alter the Original Subcontract because of a change in conditions, scope of work, services offered, price or schedule. This document is used as an amendment to the Original Subcontract and document a revised Subontract Value. The Subcontract Change Order (SCO) may document additions or subtractions to the Price, Scope, and Schedule of the Original Subcontract. Request For Information (RFI): The means of documenting and communicating questions, requesting additional information, additional documents, and responses from project team members that are critical in nature which may or may not impact the schedule or budget. An example RFI would be a contractor emailing the architect a question about the interpretation of a construction drawing detail or a note in the specifications. Cost Resources (MLESO): Categories that provide additional allocation, detail or classifications of actual or estimated costs. These Cost Resources represent subcategories of costs within every Job Cost Code. Others may refer to these as “Cost Types”. Each Actual or Budgeted Cost is additionally categorized by one of the 5 Cost Resources, namely, Materials, Labor, Equipment, Subcontract, and Other (MLESO). The Differences There are many Corecon phrases that can be confused and a comparison of these phrases helps to provide clear understanding. Projects vs. Leads: As stated previously, a Project is a group of tasks and objectives that require considerable planning, effort and coordination. Projects in Corecon represent a commitment or obligation between the Contractor and the Project Owner (Customer, Client). In Corecon, a Lead represents an opportunity which may or may not represent a specific potential customer. A Lead may be an upcoming bid, and result in a proposal. A Lead may be prompted by an Invitation to Bid from a Single Customer or Multiple Customers. For example, if your entity is a Subcontractor bidding on Publicly Advertised Work, your Lead is the means of documenting bids being sent to multiple General Contractors. Estimates Vs. Budgets Vs Projections: An Estimate is an approximate calculation of the quantities and costs it will take to finish a specific part of the work and is usually tied to opportunities and potential work (or Leads and Estimating). For example, an Estimate is Prepared before the Proposal can be calculated. In Corecon, a Budget represents an approximation of the Income and Costs related to an Awarded Project and Prime Contract. You will see the term Budget in the Contract Administration Module referring to Cost Budget, Revenue Budget, Labor Hour Budget, etc. A Projection is a Forecast of future conditions based on present conditions and performance. For example, in Dashboards and Analytics, you may be asked to provide Forecasts based on current conditions so that Projected Cost at Completion can be calculated. Bills Vs. Invoices: Bills are records in Procurement that represent payment requests from Vendors, Suppliers, and Subcontractors. Invoices are records in Contract Administration that represent the payments the Contractor requested from the Project Owner (Clients, Customers). Job Cost Codes Vs Master Cost Codes: Master Cost Codes are a Standard set of classifications used to span reporting of multiple projects and to span time. The classifications are the means used to compare Budgeted and Actual Costs within a Project to similar results of other Projects. The goal of using Master Cost Codes is to group data related to a specific task or activity so that it is easily compared to the same specific task or activity under different conditions, Projects and Contracts. Master Cost Codes are maintained in the Global Settings with up to 4 tiers available in Corecon so that every newly created Project and Contract can access similar tasks or activities. These 4 tiers (or layers) of detail allow users of Dashboards and Analytics to drill up or drill down on details. Job Cost Codes are used to track project financials and are required when entering transaction details (eg. Prime Contract Budgets, Change line items, PO line items, Miscellaneous Expenses, and Timecards etc.). Although Job Cost Codes can be added at any time, it is recommended that these codes be defined during the project setup phase. Job Cost Codes are typically imported from the Master Cost Codes list but unique codes can also be established for a particular project. Final Thoughts Corecon has additional definitions and terminology not covered in this article but they can be accessed in our knowledge base upon subscribing.

What is forecasted cost at completion?

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What is forecast to complete?

What forecast cost estimation?