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Percentage-of-Completion
What is percentage of completion?
Percentage of completion (POC) is a metric that represents the proportion of work completed on a construction project at a given point in time. It is expressed as a percentage of the total contracted work. The POC is important to subcontractor workflows for several reasons:
- Payment schedules: Most construction contracts stipulate that subcontractors receive payment based on the percentage of work completed rather than a lump sum payment at the end of the project. The POC determines the amount of payment that a subcontractor can request from the general contractor (GC) or the project owner for the work performed during a specific billing period.
- Cash flow management: Subcontractors rely on progress payments to maintain a healthy cash flow and cover expenses such as labor, materials, and equipment. The POC directly impacts the timing and amount of progress payments received, allowing subcontractors to plan and manage their financial resources effectively.
- Project monitoring and control: Tracking the POC helps subcontractors monitor their progress against the project schedule and budget. It enables them to identify potential delays or cost overruns early on, allowing for prompt corrective actions.
- Dispute resolution: In the event of disputes or claims related to payment or project delays, POC documentation can serve as evidence to support the subcontractor's position and substantiate their claims for outstanding payments or compensation.
- Resource allocation: By monitoring the POC, subcontractors can better plan and allocate their resources (labor, materials, equipment, etc.) across multiple projects, ensuring efficient utilization and avoiding resource conflicts or shortages.
- Project closeout: The POC is crucial during the project closeout phase, as it helps determine the final payment due to the subcontractor and ensures that all work has been completed according to the contract terms.
Overall, POC serves as a versatile tool throughout the entire project lifecycle, from initial payment requests to final closeout. And with Siteline, managing POC workflows becomes effortless. Siteline makes progress billing a cinch by:
- Generating custom pay applications with real-time POC calculations
- Offering intuitive dashboards for clear financial visualization and decision-making
- Integrating with GC payment portals for accurate, timely pay application submissions
- Centralizing all documentation for enhanced collaboration and communication
Book a demo today to experience how Siteline can empower your team to make informed decisions, maintain a steady cash flow, and ensure successful project closeouts.
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Other construction terms
What is a Schedule of Values (SOV)?
A Schedule of Values (SOV) is a detailed breakdown of a construction contract that itemizes the total contract amount into specific work categories, phases, or deliverables. It shows the dollar value assigned to each component of work that’ll be completed during a construction project. As such, the SOV is a critical component of successful project and cash flow management. It also lays the groundwork for progress billing and payment applications (like AIA® G702/G703® forms).
Here’s how it works:
- Contractors create initial SOVs that allocate contract value across work phases.
- They maintain the SOVs to align with actual work schedules and ensure billing requests match project progress.
- SOVs get updated when changes occur on the job, altering the original scope and budget.
As you can imagine, managing multiple SOVs across projects while tracking actual costs against line items becomes complex and time-consuming.
Siteline streamlines this entire process by integrating with major construction ERPs and accounting software. Subs import project data from their ERP into Siteline, compile and send pay apps directly in the system (accounting for any change orders), and then rest easy knowing that Siteline automatically syncs approved invoices back to the ERP.
The result? Faster billing cycles and quicker payments. Want to see how it works? Book some time with us.
What is a Performance Obligation?
A Performance Obligation in the construction industry refers to a commitment or liability that a contracting party has to perform and fulfill, according to the terms stipulated in a contract. It includes the delivery of services or completed work components. For example, if a construction company has a contract to build a commercial complex, their performance obligation could involve the construction of the entire complex or individual stages of the contract, such as erecting the structure, installing heating systems, laying down the flooring, among others. Each of these components may have their own deadlines and quality standards. Thus, not fulfilling these obligations could result in penalties or legal consequences. Therefore, recognizing and managing performance obligations is crucial in construction project management.
What is a conditional lien waiver?
A conditional lien waiver is a legal document used in the construction industry that states a contractor, subcontractor, or supplier will give up or waive their right to place a lien on a property, under the condition they receive their expected payment. This waiver serves as a protection mechanism for the party responsible for payment, ensuring that once the payment is made, no future lien could be placed on the property for the services or materials provided.
Conditional waivers come in two forms, tied to when you're billing:
- Conditional progress waiver: Submitted with each progress pay application during the project. It waives your lien rights for the work billed in that period, but only takes effect once you're paid for that period.
- Conditional final waiver: Submitted with your final pay application at closeout. It waives your lien rights for the entire project, including retainage, but only takes effect once you receive full and final payment.
In both cases, the "conditional" part is what protects you: your lien rights stay intact until the payment actually clears, so signing early doesn't cost you leverage if a check is late or bounces.
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