Decoding Construction Management

ARTICLE - Construction management is a complex field with specialized terms that can perplex those outside the industry. Yet, understanding these terms is crucial for anyone involved in or interacting with construction projects.

Here's a guide to ten important construction management terms commonly used but have yet to be widely understood by most people.

1. Retainage
   Retainage refers to a portion of a payment withheld until the project is fully completed. This practice is common in construction to ensure contractors finish their work satisfactorily before receiving full payment. Retainage can apply to incoming payments (money the contractor is set to receive) and outgoing payments (money the contractor pays to subcontractors or suppliers). It is a financial incentive for all parties to fulfill their obligations completely.
2. Gantt Scheduling
   Gantt scheduling is a visual project management tool that outlines the timeline of a construction project, including dependencies between tasks. Named after Henry Gantt, this chart shows tasks along a timeline, indicating the start and finish dates. Gantt charts are particularly useful in construction because they clearly display which tasks must be completed before others can begin, helping to keep the project on track.
3. Schedule of Values
   The Schedule of Values is a detailed document provided by the contractor that breaks down the total contract sum into smaller portions; each allocated to a specific part of the work. This document is essential for progress billing, allowing both the contractor and the client to see how much of the budget has been spent on each aspect of the project. The Schedule of Values helps maintain transparency and ensures that all parties understand how funds are distributed.
4. Job Costing
   Job costing is an accounting method used in construction to track all costs associated with a specific project, including labor, materials, and overheads. By meticulously tracking these costs, contractors can calculate the total expenses of a project, ensuring profitability and helping to avoid cost overruns. Job costing is critical for financial management within a construction project, providing the data needed to make informed decisions.
5. AIA Contracts
   AIA contracts refer to standardized legal forms created by the American Institute of Architects (AIA). These forms define relationships and terms in design and construction projects, ensuring agreement clarity and fairness. AIA contracts are widely recognized and used throughout the construction industry, offering a consistent framework that helps prevent misunderstandings and disputes.
6. Change Order
   A change order is a document that modifies the original scope of work in a construction contract. Changes can arise for various reasons, such as unforeseen site conditions or changes in project specifications. Before the changes can be implemented, all parties involved must agree on a change order. It details the new work to be done and any adjustments to the project's timeline or budget.
7. Bid
   A bid in construction is a formal offer made by a contractor or subcontractor to complete a project at a specific price. When a construction project is in the planning stages, multiple contractors or subcontractors submit their bids, detailing the cost and scope of the work they propose to undertake. The project owner or general contractor then reviews these bids and selects the one that best meets their needs, considering factors like price, experience, and the quality of work. Choosing the right bid is crucial, as it sets the foundation for the project's success.
8. Submittals
   Submittals are documents, drawings, samples, or mock-ups that a contractor must provide to the architect or project owner for approval before proceeding with certain aspects of the work. Submittals ensure that the materials and methods proposed by the contractor meet the project's specifications. They are critical for maintaining quality control and ensuring the project is built according to plan.
9. Lien Waiver
   A lien waiver is a document that a contractor, subcontractor, or supplier signs to acknowledge that they have been paid and waive their right to file a lien against the property for the amount paid. Lien waivers protect property owners from future claims by parties who have worked on or supplied materials for the project. They are an essential part of the payment process in construction.
10. Critical Path Method (CPM)
    The Critical Path Method (CPM) is a project management technique used to identify the sequence of essential tasks that must be completed on time for the entire project to be finished by the deadline. The critical path is the longest stretch of dependent activities and determines the shortest possible duration to complete the project. CPM is crucial for project scheduling and helps managers focus on tasks directly impacting the project's completion date.

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Understanding these construction management terms is just the beginning. To effectively manage a construction project, you need powerful tools that streamline processes and enhance visibility. FullClarity's Construction for NetSuite is a construction management module seamlessly built inside Oracle NetSuite, the world's #1 cloud ERP. This platform, developed by construction professionals for construction professionals, combines advanced features like retainage, Gantt scheduling, job costing, and AIA contract management, providing construction professionals with a comprehensive toolset to manage projects more efficiently.

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If your construction company is looking for a way to improve efficiency and ensure data accuracy for optimum decision-making, FullClarity wants to speak with you. Contact us to arrange a no-obligation consultation with one of our experts.