Construction Financial Models
Pages: 7 Published: Nov 2012
The difference in the prevailing financial models of operation in construction companies, specifically between the general contractor and subcontractors, has driven the industry to look for a common denominator for progress reporting, which has hampered the true measurement of productivity as the change of rate in construction project progress. The common denominator historically used is the exchange of money on a project, measured with accounting methods. However, this common measurement does not connect to the outcome of construction projects, which is CPIP. In other words, just because the subcontractor bills half of their contract value does not mean they are 50 % complete with the job. To combat this discrepancy, contractors and their customers have had to build in contract clauses such as liquidated damages, force majeure, no-damage-for-delay, and others, as well as retention and other punitive financial means for poor productivity.
Paper ID: MNL6520121210904
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