Commercial & Finance

Adjudication is a fast, statutory process under Australian security of payment laws in which an independent adjudicator decides how much of a disputed payment claim must be paid. The decision is binding for now and enforceable as a debt, but the parties can still argue the final amount later under the contract.

A bank guarantee is a written undertaking from a bank to pay the principal up to a set amount on demand, given as security for the contractor's performance under a construction contract. It is the most common alternative to cash retention on Australian commercial projects.

A bill of quantities (BoQ) is a document listing the measured quantities of each item of work, such as cubic metres of concrete, so every tenderer prices the same quantities. In Australia a quantity surveyor prepares it, and it is more common in civil and government work than in private building.

A commitment in construction cost management is a cost the project has contractually agreed to pay, such as a subcontract, purchase order or hire agreement, whether or not the work has been done or invoiced yet. Tracking commitments against budget shows how much of each cost code is already locked in.

A cost plus contract is a construction contract where the principal pays the contractor's actual costs of doing the work, plus an agreed margin or fee for overheads and profit. It is used when the scope is too uncertain to fix a price, and it shifts most cost risk to the principal.

Cost-to-complete is the forecast of the remaining cost needed to finish a construction project, on top of what has already been spent or committed. Added to actual costs to date, it gives the forecast final cost, which commercial managers compare with budget to predict the project's margin.

A delivery docket is the document that comes with materials or plant delivered to a construction site, listing what was supplied, how much, from whom and when. Site staff check and sign it on arrival, and it later supports invoice matching, quality records and quantity tracking.

Preliminaries are the costs of running and supporting a construction site that are not part of any single trade, such as site supervision, site sheds, cranes, scaffolding, temporary services, insurances and fencing. In Australia they are priced as a separate section of the tender, often split into fixed and time-related costs.

A prime cost item (PC item) is an allowance in a construction contract for the supply of a specific item that has not been selected at the time of contract, such as tapware, appliances or tiles. Once the item is chosen, the contract price is adjusted for the difference between the allowance and the actual cost.

A progress claim is a contractor's periodic request for payment for work completed during a period, usually monthly, under a construction contract. In Australia a progress claim can also be a payment claim under the state security of payment Act, which triggers strict deadlines for the respondent to reply and pay.

A provisional sum is an allowance included in the contract price for work or items that cannot be accurately priced at tender, usually because the design or scope is not yet settled. When the work is done, the allowance is replaced by the actual cost, plus any agreed margin, and the contract sum is adjusted up or down.

An RCTI (recipient-created tax invoice) is a GST tax invoice prepared by the buyer instead of the supplier. In Australian construction, head contractors commonly issue RCTIs to subcontractors after assessing their progress claims, so the invoice matches the amount actually approved for payment.

Retention is a portion of each progress payment that the principal or head contractor holds back as security for the contractor's performance, usually until practical completion and the end of the defects liability period. In Australian construction it is typically capped at around 5% of the contract sum.

An S curve is a graph of cumulative cost, value or progress plotted over a project's duration. It gets its name from its shape: slow at the start during establishment, steep through the main construction phase and flattening towards completion. Builders use it to compare planned against actual progress and cash flow.

Security of payment is the set of state and territory laws that give anyone who carries out construction work or supplies related goods and services a statutory right to progress payments, strict deadlines for responding to payment claims, and fast adjudication of disputes. Every Australian state and territory has its own Act.

A subcontractor statement is a NSW form in which a subcontractor declares that, for a set period, it has paid its workers' wages, workers compensation premiums and payroll tax. Holding a valid statement protects the principal contractor from becoming liable for those unpaid amounts.

Value engineering is a structured review of a design to achieve the required function at lower cost, or better value for the same cost, without reducing quality, safety or performance. In Australian construction it usually happens during design or tendering, when contractors propose alternative materials, systems or methods.