The Approval and Tracking of Work Beyond the Scope of the Original Contract
From extras to cash allowance draws, contingency expenditures to fund allocations, there are many ways to affect the original contract price, authorize new work within the existing contract price, and track adjustments and progress to the Work. Let’s take a closer look at how to handle any situation you may encounter.
Order is a generic term we use to include any document that records the Owner’s approval and/or Architect’s instruction to:
- Adjust the Contract Price for the purposes of changing the Work or Schedule, or
- Adjust the Contract Price for record-keeping purposes, or
- Withdraw funds from an Allowance or Contingency
In FIVE, all adjustments to the contract price and withdrawals from funds established by the original contract will be logged on the Orders tab.
Adjusting the Contract Price for Changes to the Work or Schedule
The original Contract Price can be increased or decreased to accommodate the realities of construction. We discuss this process in more detail in Changes to the Contract Price and Time. Additions and Deletions to the Contract Price are logged as Change Orders requiring the Owner’s approval.
In FIVE, create an Order with a Contract Value Effect of Adjust Contract Value, then mark it Approved to change the Contract Price by the amount of the Order.
Adjusting the Contract Price for Record-Keeping Purposes
This type of Order is typically issued when closing out a project, though it can also be issued to increase the value of an under-budgeted Allowance or Contingency mid-work.
At close-out, any contract items, allowances, or contingencies that have remaining funds can adjusted down to the value of the work completed. This ensures that everything balances, and the total value of the completed work is 100% of the total contracted amount.
In FIVE, create an Order with a Contract Value Effect of Allocate to Fund and link it to an item on the Contracts tab in the Contract cell. Finally, approve the Order to finalize the adjustment.
Withdrawing Funds from an Allowance or Contingency
Funds can be withdrawn from an Allowance or Contingency that was established as part of the original contract to cover anticipated but undefined work will be encountered as the project progresses. These withdrawals are logged as Cash Allowance Draws or Contingency Expenditures, which we discuss in more detail in our Introduction to Construction Contract Administration Change Management post.
In FIVE, create an Order with a Contract Value Effect of Draw from Allowance or Expenditure from Contingency. Link the Order to the appropriate Allowance or Contingency in the Contract cell, and approve it to authorize the withdrawal. Progress of the Work associated with the withdrawal will be entered in the Order. The sum of all progress completed against the individual withdrawals will appear on the linked Allowance/Contingency on the Contracts tab.
Other CVE Options
The default Contract Value Effect is None, which is useful for when you are logging a new Order but aren’t sure whether it will be an addition/deletion to the contract, a draw from an Allowance, or an expenditure from a Contingency. You can stay ahead of the paperwork by entering all of the known information, and then select the appropriate CVE when it has been determined.
The Work Only CVE is used in extremely rare circumstance beyond the scope of this post. If you find yourself in a contract “pickle” and can’t get the numbers to work with any of the other CVEs, then Work Only might be the tool. Contact us to discuss your situation and we can provide expert advice. We’re here to help!
A Handy-Dandy CVE Table
All the information you need, distilled to a simple table:
|Tab to Record|
|None||NO||NO||NO||N/A||When CVE is to be determined|
|Adjust Contract Value||YES||NO||YES||ORDERS||CO|
|Draw from Allowance||YES||YES||NO||ORDERS||CAD|
|Expend from Contingency||YES||YES||NO||ORDERS||AEC|
|Allocate to Fund||YES||YES||YES||CONTRACTS||Close-out, Under Budgeted Funds, and Construction Management Contracts|
|Work Only||YES||YES||NO||ORDERS||Ask Us!|