Construction seems to be coming back.  Before the state of Minnesota government shut down last Friday, I was hearing from both existing client construction firms and prospective client construction firms about improvements they wanted to make. 

I would assume that outside of Minnesota, this wake-up in the construction community is happening since other states don’t have the unfortunate shut down in state financed projects that many of our construction firms are seeing here.  (Our income tax is 8% here and the state would like to increase that-so there is plenty of state money to spend on construction and everything else.)

This post is about a Microsoft ERP product called Dynamics SL and what it can do for construction firms relating to managing their contracts and sub-contracts.

Contract administration presents a number of different challenges to many businesses, particularly in the construction industry. The project leader must coordinate communications with the owner or prime contractor while managing a combination of subcontractors, internal staff, and resources. Visibility of the impact of changes as a project progresses is critical.

Contract Management is a management tool that includes the following features:

• Tracking of all project change orders and their associated budgets, including any pending change orders, for both client contracts and subcontracts with outside vendors

• An approval process for contracts and subcontracts

• Management and control of all submittal and transmittal documents, including permits and permissions, insurance, safety notices, and liens/lien waivers

• Disbursement control for payment on subcontracts, including automatic creation of Accounts Payable vouchers and generation of retention payable documents

• Modifications to Check Print in Accounts Payable to present project and subcontract information and to provide support of joint checks to multiple parties

• Interfaces with a Flexible Billings module to produce construction billings using the format recommended by the American Institute of Architects (AIA)

• Pay-when-paid terms for subcontracts, supported by screens in the Accounts Payable module

• Pay When Paid Link Assistant helps you search unlinked open vouchers or credit adjustments with a terms discount type of pay-when-paid, or search open unlinked invoices of Open Item customers and link the documents.

• Pay When Paid Link Entry helps you search linked open vouchers or credit adjustments with a terms discount type of pay-when-paid, or search open linked invoices of Open Item customers.

• Payment Selection reviews the status of APARLink records for the open AP document to determine whether pay-when-paid terms documents are eligible for payment during the selection of open AP documents.

A pay-when-paid terms document is eligible for payment if the status of its link is Closed, indicating its linked AR invoice is paid in full. A pay-when-paid terms document is not eligible for payment if a link to an AR invoice does not exist or the Status of its link is Open, indicating its linked AR invoice is not paid in full.
Refer to the Accounts Payable user’s guide or online help for more information about pay-when-paid processing.

The Contract Maintenance screen records reference information related to an agreement between the contractor and the customer or owner. This information includes a description of the scope of work, addresses, critical dates, payment terms, and the contract’s status. Multiple projects may be associated with a contract.

The Project Change Orders screen tracks changes to a project that require the owner’s approval. These changes may be to budgets, schedules, or scope of work. When interfaced with the Flexible Billings module in Dynamics SL, these changes can print on the construction billing. A Project Change Order Inquiry screen displays all project change orders for a specific project. You can access this inquiry directly from the menu or from Contract Maintenance.

The Subcontract Maintenance screen records information about subcontracts with vendors providing services or materials for a project. You can set up a subcontract for a project without specifying a vendor, but you must assign a vendor before you can change the status of the subcontract to committed or awarded.
Unpaid subcontracts with a status of active/committed are loaded as commitments and may be displayed using the Commitment Detail Inquiry drilldown in Project Controller.

Subcontract Print produces a document from a Microsoft Word template, substituting key values from the associated project and subcontract information. The subcontract can print in preliminary, final, or reprint mode. Subcontract Change Orders records a proposed or actual change to a subcontract. Typical information tracked includes changes to budgets, schedules, reasons for the change, and the initiator of the change request. An approver, approval date, and status for each change order are also stored.
Subcontract Change Order Inquiry lists all changes to a given subcontract.

Submittals refer to documents or deliverables such as permits or plans associated with contracts or subcontracts that the user wants to track. Submittal/Transmittal Entry maintains the data associated with submittals, transmittals, and other paperwork or milestone events.

It serves as an electronic tickler file for reminding users and managers of due dates as well as tracking critical events in order to meet contract requirements. Submittals can be set up to stop payments generated by Automatic Payment Analysis. You can automate notification of a missed date or receipt of required documents using Process Submittal Alerts.

One significant aspect of managing subcontractors is controlling funds disbursement. This necessitates a close relationship between Contract Management and Accounts Payable.

Subcontractors are a subset of the vendors in the AP Vendor Master who work on projects. You set up subcontractors in Contract Management using Subcontractor Vendor Maintenance. Subcontractor Vendor Maintenance identifies vendors as valid subcontractors and stores address and insurance-related information.

Subcontractor Inquiry lists all subcontracts for a specific vendor. A button on this screen allows you to open Subcontract Payment History for any of the subcontracts shown. This inquiry lists all payment data for a particular project-subcontract combination.

You can access the inquiry directly from the menu or from a number of screens including Subcontract Payment Review & Approval, Subcontract Payment Request Entry, and Subcontractor Vendor Maintenance.

Interim payments to subcontractors are often based on the percentage of work completed for various subcontract line items. The payment amount may be subject to retention or contingent upon receipt of submittals. Subcontract Payment Request Entry submits a request for payment based on the payment amount or percentage authorized by the project manager for each line item of the subcontract.

The function verifies that the requested amount does not exceed the maximum amount payable and automatically computes and displays a retention amount, if applicable. Retention is computed based on the terms of the subcontract with override capability.

Subcontract Payment Review & Approval allows the manager to authorize or reject the payment request. If the approver rejects the request, the Communicator module sends automatic notification of the rejection to the initiator of the payment request. If the payment request is approved, a voucher is automatically created in Accounts Payable and placed on hold.

A second voucher will be created for retention amounts withheld from the payment request, if any. The Accounts Payable document number is stored with both the original payment request and the subsequent transactions posting back to Project Management and Accounting from Accounts Payable.

Joint Payee Maintenance adds the names of joint payees to be included on checks issued to a subcontractor at a project-subcontract level. Entering a release date stops the joint payee name(s) from appearing on subsequent checks.

Some subcontracts require that the subcontractor submit a lien waiver. Lien Waiver Print produces a document for signature and return by the subcontractor. The user specifies a check number or range of checks that must be accompanied by a lien waiver. The document is then available to accompany the check. You can block subsequent payments if the subcontractor has not returned a prior lien waiver.

Automatic Payment Analysis examines various criteria to determine whether payment of the subcontractor’s vouchers can be issued. Potential reasons for withholding payment include expiration of insurance, failure to return lien waivers, or failure to return vital submittals when due. Rules can also be set up to issue a warning of a problem but not block payments or, if prior problems have been resolved, remove prior holds. A report shows warnings and those items remaining on hold along with the reason for placing them on hold. The function also generates Communicator messages if you have Communicator.

If a voucher remains on hold due to a pay-when-paid requirement at the subcontract level, it is released only when the customer pays the invoice on which you billed the voucher. A pay-when-paid condition exists when the customer must pay the invoice for a subcontractor’s request for payment before you disburse the payment.

Accounts Payable Check Preview and Check Print can print vendor-project information and support joint payee names. The payment processing and control can be set up to prevent remitting one or more subcontracts on the same check (if they satisfy the same vendor-project requirement) to accommodate joint payee processing.

So Construction may not be booming for us here in the Twin Cities yet, but when it does, please call us if you are looking for this type of functionality and are based in Minnesota or a nearby state.