Construction Funding Control (Project Controls)
During the course of a construction project, depending on the specific terms of the contract documents, most contractors request payments prior to full completion of the job. These typically come in the form of invoices, "draw requests" or "progress payments" and may come each month, or following specific predetermined milestones...
The Solution: Funding Control
SHCC will monitor, review, and offer guidance regarding the financial aspects of a construction project to ensure that you know what you are paying for.
Implementing a funding control process early on in a project is important. Ideally, this begins before contractors submit bids. Below are some of the tasks that we have found effective on previous projects during the bid phase:
- Contractor pre-qualification - We check to make sure the contractor's license is active and in good standing. We also make sure that the proper bonding and insurance is in place.
- Bid package review - We make sure that everything makes sense. One of the most valuable aspects of a properly prepared bid package is enabling "apples to apples" comparison of bids submitted by contractors.
- Bid submission review - When the bids come in, we make sure that everything looks right. If a contractor's price seems too good to be true, there is probably a reason. Sometimes clarification is needed - we can help.
In most construction projects, contractors are entitled to partial payments prior to final completion of the work. These progress payments are spelled out by the terms of the contract with the owner and are subject to state law. Contractors are also entitled to obtain a lien secured by the property's title to guarantee payment for their services - this is also subject to state law.
To keep the job on track, and to prevent disputes, here are some of the services we typically provide:
- Review invoices and draw requests - Contractors submit invoices and/or draw requests periodically (typically once each month) with the expectation of prompt payment. Is everything in the invoice/draw correct? Has the work been performed? Were the materials/labor used on this project, or another one the contractor or subcontractor is working on?
- Recommend and approve payments - Once the payment request has been reviewed, the owner needs to promptly pay the contractor in order to keep progress moving forward. We give you the confidence that the amount requested is fair and appropriate. Peace of mind for owners can be fleeting during a construction project, but we try to help with that as much as possible.
- Review lien releases - Once the contractor and/or subcontractor has been paid, they are obligated to release their lien against the property. On larger projects, there should be partial lien releases at predetermined points. This process can be confusing, and the paperwork is not exactly clear.
Communication is Everything
Throughout the project, we keep our clients informed. Our experience in litigation has taught us that in the event of a dispute, often times the party with the best and most thorough documentation wins. We also know that the best way to avoid a dispute is open and direct communication between parties.
Each month, if not more frequently, we will prepare a progress report documenting the project's status. If there are any concerns, we will immediately bring them to the client's attention. If so desired, we can also communicate directly with the contractor on the owner's behalf to resolve any misunderstandings.
Finances aren't the only thing at risk during a construction project. There are many other concerns, such as the scope of work, schedule, and making sure that the work complies with applicable codes and standards.
Learn more about some of the other solutions we offer: