Very often we enter into Construction Management contracts, where the owner is in contract directly with subcontractors, and therefore makes payment for all subcontracts and major materials purchases directly. The challenge for us is to be able to process the accounts payable on behalf of the owner to be able to do the following:

1. Provide monthly accounts payable information, including providing list of current payables
2. Record job cost and produce job cost reports 
3. Update change orders to owner’s contracts with subs as well as to cost budgets
4. Maintain subcontract holdback control as well as subcontract payment history 
5. Subcontract tracking of document requirements and milestone dates

To accomplish the above, we set up all our Construction Management jobs in a ‘dummy company’ complete with a mirrored database of suppliers, accounts, etc. All items to be paid by an owner are entered into this parallel database which accomplishes all of the above. We also set up a G/L bank control account for each job so that a separate cheque # sequence for each job is maintained. We do the same month-end cash requirements, cheque run, and cheque register for each job which is then sent to the owner as a record of the cheques they are to issue (along with invoice and voucher backup). For one job we even have obtained blank cheques drawn on the owner’s bank account which we use to produce actual cheques which are then sent to the owner for signature and release. This provides clarity and ease for the owner to administer construction activity, which for many is not familiar territory, as well as increased confidence in Titan as their construction manager.

This system works well to accomplish the above. The only issue that needs to be addressed is the possibility of printing a consolidated job cost report that would combine estimates and job costs that the owner paid as well as recoverable costs (materials and labour) paid by Titan. This way a complete job report could be produced that shows all costs and estimates (regardless of who actually issued payment). This would be the finishing touch on a system that has worked very well to provide controls and reporting on costs not directly paid by Titan.

--Gerald, Titan Construction