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Author: Luiz Oliveira

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Accounting Accounting Software Construction ERP Software Industry Insight Ultimate Guide

Understanding the Basics of RFI in Construction

understanding rfi in construction

Requests for information (RFIs) are essential elements of construction project planning. When a stakeholder wants to improve or clarify a certain aspect of the project, they can file an RFI to gain access to relevant data. In this way, RFI plays a small part in keeping everyone informed and ensuring the project runs smoothly.

Here’s everything aspiring professionals need to know about the hows, whys and whens of RFIs in the construction industry.

Key Components of RFI

RFIs are supposed to provide insight and explanation, so they must follow a consistent structure that lays out the information in an easily digestible format. Most RFIs are only a few pages long and include the following components:

● Project specifications

● Construction company’s name and contact information

● The addressee’s name and contact information

● RFI date, number and response deadline

● Title, abstract and detailed description of RFI

● Space for the company to address the question or concern

Maintaining this standardized format helps construction companies formulate a concise and timely response to the RFI. Timeliness is more important than ever in the construction industry, as labor and material shortages cause frequent project delays and force contractors to extend timelines. Reducing informational bottlenecks keeps the project moving.

Construction companies can also make quick resolutions to RFIs thanks to recent advancements in management software. All project datasets and descriptions are stored in a centralized digital location with no unnecessary paperwork, allowing stakeholders to see real-time updates and access the latest versions of important documents — including RFIs.

Another reason for RFI’s increasing effectiveness is the growth of big data in construction. Industry professionals now have access to greater amounts of data than ever before, thanks to the growth of artificial intelligence (AI) analytics tools. More available data allows contractors and stakeholders to make accurate estimates and bids that lead to RFI resolutions.

Types of RFIs

Although RFIs generally follow the same template, each request focuses on a specific application. Their categorization determines who needs to send and receive the requested information.

The main requests a construction company might receive during an average project include:

● General issues: This type of RFI addresses a broad range of topics, from missing documents to employee schedules to equipment warranties. It’s a quick and simple way to address day-to-day problems that might arise during a project:

● Design: RFIs play a key role in tracking the design process and helping contractors implement changes.

● Feasibility: This type of RFI is often part of a feasibility assessment that has identified weak points in a project’s budget or logistics.

● Coordination: This RFI deals with workplace safety concerns and project scheduling conflicts.

● Resource management: Contractors will use this RFI whenever they need to make a timeline adjustment that affects resource allocation.

● Scope deletion: Whenever a stakeholder or design planner wants to remove a certain feature from the project’s design, they will request a scope deletion.

● Value engineering: This type of RFI deals with new proposals to improve the project’s cost efficiency.

● Change in specifications: Any time someone wants to change something about the building’s design, they will request a change in specs. These changes can include architectural features, materials and overall square footage.

There are also three basic steps that every RFI follows:

1. Submission: The party seeking new information will submit an RFI by either sending it directly to the contractor or to an intermediary. Stakeholders will often use an intermediary if they’re not on-site, while design planners or subcontractors can go straight to the contractor for answers.

2. Response: The recipient prepares and sends a response prior to the RFI’s deadline. Sometimes the response is available on the same day, but it can also sit unresolved for several days if the request involves a major overhaul of the project.

3. Evaluation: The first party evaluates the response and determines whether the case is resolved. If the response did not address the RFI’s question or concern, another RFI or a more formal method of correspondence might be required.

There is a clear overarching theme that connects each type of RFI. While they might focus on different topics, they share the same goal of optimizing the project’s workflow. It’s easy for information to get lost in the shuffle and never reach the right personnel. If and when that happens, an RFI is a fast and reliable course of action.

Challenges With RFI

While RFIs follow a straightforward procedure, there are still some weak points. The most glaring issue is the potential for major delays and cost overruns if the RFI doesn’t get resolved on time. If the RFI aims to address a pressing issue, it can hold up the entire project until the recipient formulates a response.

According to a 2013 study on the cost-effectiveness of more than 1 million RFIs, Navigant Consulting found the average request cost $1,080 on average and 10% of them were deemed “unjustifiable.” Moreover, about 25% of RFIs did not receive a reply by the deadline because the requests were unnecessary or impossible to complete.

In order to address these challenges, companies must set clear expectations for their RFI protocols and provide as much context as possible when filing one. The exact nature of the question or misunderstanding must be obvious to all parties involved.

The use of advanced software will also help them communicate without confusion and identify real-time solutions rather than backlogging the project with missed deadlines.

How Artificial Intelligence is Improving RFI

The rapid development of artificial intelligence (AI) has made communication in construction much easier. The name of the game is predictive analytics. Rather than speculating about project issues and submitting an RFI without just cause, construction professionals can leverage AI software to anticipate problems before they arise.

Predictive analytics uses statistical algorithms and external data to forecast future trends. In the context of construction, these algorithms help managers predict and mitigate risks before they cause a disruption. An employee might still have to submit an RFI, but it will include the necessary information to solve the problem.

AI architectural technology has also helped to reduce the number of RFIs by providing accurate building blueprints, organizing documents, tracking inventories and optimizing deliveries. Improving these crucial project management tasks leads to fewer clashes between departments and thus fewer RFIs.

AI also helps companies track the resolution of RFIs by grouping them into similar categories and automatically detecting responses. RFI response software takes over much of the manual effort involved in the RFI process, including creating custom templates and instantly sending field notes with real-time updates to the right personnel. All communication is streamlined on the same online platform. No paper documents or written reports are necessary.

RFI – Challenging yet Crucial

All construction professionals agree that RFIs are crucial processes for discovering and resolving project issues. However, they can only work to their full potential if contractors, stakeholders and clients include the right information. This challenge will persist until every company has invested in capable management software that optimizes communication and collaboration.

Let us help you with the automation of tasks!

With Premier, you don’t have to worry about construction accounting or any other step of project management. Request a demo to see how our features can save you time and maximize your profit!

Evelyn Long is a writer and the editor-in-chief of Renovated. Her work has been published by NCCER, Build Magazine and other online publications.

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Construction Ultimate Guide

Construction contracts: a complete guide for your company

Man signing a contract.

Construction contracts are one of the first steps of a project, describing all prizes, steps, and prices accorded to the customer. It is essential to have a clear communication, which avoids misunderstandings over scope, delivery, and budget.

With different projects and needs, each company can choose a type of construction agreement. As they have distinct advantages and disadvantages, it is important to learn more about them before choosing the best for your future projects. Premier Construction Software prepared the following guide to help you understand them!

What are construction contracts?

Construction contracts are legally binding agreements between parties involved in any construction project. These contracts outline the obligations, responsibilities, and rights of each party involved. The parties generally include the owner, contractor, subcontractors, construction managers, architects, and sometimes engineers.

The budget is described and distributed in operations, materials, equipment, and employees in order to maximize the profit. Even if the value is defined before the project starts, it can change due to over-budget or unpredictable modifications to the prices and schedule for various reasons, including accidents, climate, and readjustments with suppliers.

The construction contract or agreement puts every party on the same page and protects them legally. If one of the obligations of the agreement is not fulfilled, there are taxes and late fees that increase the value. If necessary, legal action can be taken.

Who needs to sign the contracts?

Construction contracts are agreed upon between the owner and the contractor. The company chosen has other separate agreements with architects, engineers, designers, suppliers, and subcontractors. It all must be organized in a project management software like Premier.

Types of construction contracts

Every building contract can be chosen based on the type of scope and specific tasks. Each one of them has pros and cons that need to be analyzed before the document is created and both parties sign it. Keep reading to know what is best for your company!

Cost-plus contracts

Cost-plus contracts are used for uncertain expenses, reimbursing the contractors for unforeseen costs. It uses a predetermined fee, suggested and defined by the owner. Labor, equipment, and material are direct costs covered, but indirect costs required to manage the project can also be paid, such as insurance and software.

The advantages are less risk of losing money, being paid when prices rise, the quality of the service, and a safe profit. On the other hand, the drawback is that the contract manager must keep track of all expenses to present them and limit some costs. Man taking a look into a contract.

Unit price contracts

These construction contracts detail all prices per unit for labor, materials, and suppliers. As the owner pays separately, based on units, it is necessary to include the quantity required to complete the project. If it is not possible to give an exact number, an estimate is enough.

This type of agreement is good for projects with repetitive elements that can be bought in large quantities at reduced prices. The con is that not every task is that simple. Many projects are complex and require different types of materials with varying prices.

Time and materials contracts

T&M contracts reimburse the company for material costs and charge a rate for each hour of labor. It is used to control the budget and reduce the risk of exceeding material and labor costs. This helps the owner to be in advance even at the beginning of the project.

Another advantage is the additional items that provide flexibility, including markup charges and a base payment for the team members. The disadvantages are higher risks for owners (who can face exceeding costs) and detailed processes because it is necessary to track and submit working hours and material costs.

Lump-sum contracts

These contracts are known as fixed price because they establish fixed costs for materials and labor, similar to the last one. It is one of the most used in the industry due to its clear and defined scope of work, accurate estimate, and higher chances of a healthy profit margin.

Not every project is that simple to predict. One drawback of complex jobs is that they do not consider changes. As with other industries, construction faces different adjustments to the schedule due to climate change and unavailable materials.

Guaranteed maximum price contracts

A guaranteed maximum price (GPM) agreement defines a limit to all costs over the project. It is not reimbursed. Every price exceeded must be paid by the construction company, which impacts the profit.

On one hand, it is good for the owners to save money and maximize profit. On the other hand, the general contractor is responsible for avoiding over-budgeting or facing additional expenses. This is why the review of the expenses are very time-consuming and need to be carefully done.

Integrated project delivery contracts

Different from the other ones, these contracts integrate the design firm, the builder, and the owner in a collaboration system to keep all deliveries in a single document. It intensifies teamwork in order to reduce errors and share risks. However, not every company prefers it because it can be difficult to secure finances.

Manage your contracts with Premier!

Now that you know the types of construction contracts, it is time to rely on Premier Construction Software. More than just creating the agreements, you can use it to send them to be signed, add change orders, and keep track of all expenses. Contact our sales team to book a demo and optimize your project!

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Accounting Industry Insight

How to create time and materials billing for construction projects

A calculator close to glasses and a pen.

There are different types of billing methods in the construction industry. One of them is time and materials billing. Some general contractors prefer this procedure, as it shifts most of the risks onto their customers. Any costs incurred come out of the customer’s pocket, not the contractor’s.

T&M billing allows them to focus on their profits and concern themselves less with the unpredictable nature of contracting. While the agreements are straightforward, the act of putting together a bill can be daunting because it is necessary to collect all receipts throughout the project and any supporting documentation.

Factor in time for manual data entry (and the mistakes that tend to come along with it), and the process gets even more convoluted. Thankfully, there is time and material billing software that quickly and easily generates accurate, professional invoices. Learn how to use this method below!

What is time and materials billing?

The time and materials billing format involves the contractor charging the customer for, quite literally, time and materials. The contractor bills for every man-hour spent on the project, as well as any materials purchased for that job. Labor rates are typically outlined in a simple format in the contract, though these rates can vary depending on the tradesperson working on the project.

On top of the labor rates and materials costs, some contracts allow the contractor to mark up the cost of the materials a bit. Again, this is something the contract will clearly outline, but it does help the contractor maintain a healthier profit margin. Should the customer decide to use high-end materials, the contractor’s profit will grow accordingly.

To calculate the time and materials invoice, a contract needs to multiply the man-hours by the agreed-upon rate for each trade and add it to the materials costs (plus the markup, if contractually allowed). This is a very transparent billing format where the customer is aware of everything other than the hourly rate paid to the crew.

Time and materials contracts are most suitable for projects where the scope isn’t crystal clear. If the customer is undecided or the project is ripe for unforeseen costs, it helps to keep the contractor and customer on the same page. It also does away with pinpoint estimating, allowing contractors to get to work right away.

This billing format does have a few disadvantages. Contractors have to be meticulous with record-keeping, from receipts to man-hours. One missed expense, and the profit margin shrinks. Also, the costs to get the project off the ground are on the contractor’s shoulders, making timely billing a sink-or-swim proposition.

Man using the computer.

How to calculate time and materials billing

The first step for a contractor to be successful in time and materials billing is meticulously detailed record-keeping. This includes documenting labor, equipment rentals or purchases, and materials.

Contractors need to log each of those costs into the construction software’s accounting system to ensure they can charge when it’s time to bill. They also need to consolidate any separate ledgers, time logs, or job cost entries with the job. Any cost accidentally left out or forgotten comes directly out of the contractor’s profit.

Creating the bill is easy! While in the time and materials billing module, simply select and add the costs and labor hours. You can set each cost to bill with the current invoice, save them for later, or mark them as never billed.

Once you select all the costs and their billing designations, our software will automatically calculate the T&M invoice and determine the appropriate rate for each man-hour by the labor code. If the contract allows, you can set the time and materials billing module to add set percentages for materials markups.

After reviewing the invoice, our system will send the bill automatically via email to your customer. It is possible to open the document from any internet-enabled device, drastically reducing the amount of time it takes to get paid.

What documents should be included in time and materials billing?

Each project has different billing requirements, including what supporting documents the customer wants with the invoice. Premier Construction Software document management system makes it easy. Most time and material billings will include the following backup.

Invoice

The invoice should provide a summary of the amount, including the number of man-hours, the labor rate, material expenses, and the overall markup.

Transaction list

Include a detailed report of the labor hours and costs for which you’re billing. The customer will want to review this list for accuracy and use it for reporting purposes.

Copies of invoices and receipts

Most customers will want copies of your accounts payable invoices and store receipts for smaller purchases that are being used to determine the invoice amount. You can avoid spending hours on this by using a document management tool to automatically add copies of pertinent invoices to the email.

Copies of timesheets or certified payroll reports

Customers may also want to review copies of your employee timesheets showing the hours worked. If the project is prevailing wage, you may also have to provide certified payroll reports, that list all the employees on the project, the hours they worked each week, and certify that they were paid the correct wages and benefits.

Lien releases or waivers

Some customers may require copies of lien releases or waivers from your vendors and subcontractors as proof that they have been paid.

Time and material billing don’t have to be a waste of time!

Time and materials billing for construction projects requires a keen eye for detail. Being able to put your finger, or mouse, on every receipt and timesheet that applies to a project will ensure you aren’t leaving money on the table. The faster and more accurate this process is, the better.

Using Premier’s document management system with the time and materials billing module will help streamline this process. You’ll be able to create accurate invoices instantly, free from missed line items or forgotten costs. With electronic signatures, you’ll even reduce the amount of time it takes to get paid.

If your team struggles with assembling time and material billings, let us show you a simpler and easier way. Book a demo today to see it live and gain financial control and clarity of your projects!

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Construction

RFI in construction: find out how the process works

Men holding drawings.

With so many details in a project, every team member must be on the same page to understand and identify the errors with it. That’s why RFI in construction is an essential document, used to clarify the specifics besides the contract.

Even with a contract, not every step taken is the same compared to what was agreed in the beginning, especially because deadlines may need to be extended, and costs may change. With proper documentation, all can be informed in advance, but do you know what RFI is and how to do it correctly? Keep reading to find out!

What is RFI in construction?

The RFI meaning in construction is simple: it is a formal process in which a contractor or project team member seeks clarification or additional information about a specific aspect of a construction project.

RFIs are typically submitted to the project owner, architect, or engineer and are used to address potential issues or gaps in the project plans, specifications, or drawings. The RFI allows the issuer to receive accurate information or clarification, ensuring that the construction process progresses smoothly and in accordance with the project requirements.

Besides additional data, a request for information in construction has the objective of verifying contract items, substituting materials/equipment unavailable or over budget, clarifying the design, and recognizing issues due to site problems, workers, available budget, and timeline.

Even with a simple definition, the process is complex because it involves every person on the project. It can be created and submitted in a few minutes or an hour, but the response can take longer, on an average of a week, for simple requests, and even longer, for long-term and intricate contracts.

An example of RFI in construction can be seen in these steps: a general contractor submits an RFI to clarify specifications about the site and the materials to the subcontractor. The response can be immediate with the data needed, but if there is no conclusive information, the document is sent to other members of the team. Once the response is appropriate, it is given back.

Difference between RFI and other requests

There is more than one type of request, so you may find more than just RFI in construction, including RFP, RFQ, and RFT. Each one of them is distinct in the following aspects:

  • RFP: a request for proposal is used to describe the project or initiative and request bids for a qualified contractor, showing the qualifications to complete the job;
  • RFQ: a request for quote or qualifications is sent to ask for pricing details of products and services, such as the vendor’s costs and payment terms. Usually, it is used during the procurement process;
  • RFT: a request for tender is a formal invitation to submit offers on the pricing structure.

Workers taking a look into the drawings on a job site.

The creation of an RFI

An effective RFI in construction must start with a clear definition of the problem. Focus on only one per document to simplify the response, because sometimes one issue is handled easier than the other attached, while the time to answer may be longer.

More than describing the issue, use your ideas to provide different solutions. To clarify your explanation, use additional documents, like photographs and building plans (floor plan, site plan, and landscape drawings). With complete context, the general contractor can resolve the RFI without sending it to other parties.

The basic model of an RFI must include the project name, number and location, company, party information (name of the subcontractor, general contractor, or other responsible in charge of the submittal), request date, description, attachments, and signature.

Some variations include the cost impact and priority, rating as urgent or regular. A simple or more detailed document has to be split into two sections: the first for the issue and the second for the response. The answer also needs to be identified by the name of the professional, date, and attachments.

How to respond to it

The number of RFIs received by a general contractor may be huge, so it is necessary to maintain an efficient process to respond to them with a complete solution to avoid another document on the same topic. The secret to doing it properly is to read carefully and give a full answer. If help is needed, engineers, architects, and the client can be consulted.

How to improve the process

With so many RFIs to get through, optimization can be done with software, like Premier. It lets you organize them by filters, create tags to identify them quickly, start the task, save the progress, and return when time is available, as well as send them to others involved.

Our tool saves time while allowing the creation in seconds, using customized templates of RFI in construction with blocks to support documents, recommendations, and the impact on cost, time, and change requests. Once it is created, the dashboard filters by number, subject, priority (from low to high), type, section, data, and responsible person.

To remember pending reports, the system shows them in the dashboard and sends notifications through email when the response is completed. To improve the process and make the most of the software, our company can also define a specific procedure with a maximum time of response, a pattern for the template (to avoid a lack of information), and communicate when a new RFI is submitted.

Optimize this process with us!

RFI in construction is essential for communication during every step of the project. With Premier Construction Software, this task can be easily completed with personalized features for complete management. Read other articles on our blog to improve different processes. Contact us and start using our state of the art software!

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Construction

Essential Subcontractor Documents You Must Collect

Subcontractor documents being analyzed.

Before you begin working with a new subcontractor, there are several compliance papers you need to collect from them. These subcontractor documents, like proof of insurance and copies of licenses, help reduce risk on construction projects.

The documents are often required by the contract with the owner, or the general contractors may be requesting them as per their subcontractor agreement. The goal of collecting them is to ensure that the work will be completed in the manner specified in the contract and to protect the general contractor and owner from potential costs or damages caused by the subcontractor.

General contractors want to ensure that employees will be around to finish the project and provide quality work, with the necessary insurance and bonds to cover any damages that might happen during the project. We’re going to guide you through what subcontractor documents are and let you know which ones you need to collect and track!

What are compliance documents, and which ones are essential?

Before we get into what subcontractor documents you need to collect, let’s take a moment to understand why these compliance documents are important. They are requested to confirm if a person meets the minimum requirements to work with your company. They help ensure that a subcontractor meets the legal requirements for being in business, as well as any additional conditions.

Every company requires different documents from their subcontractors. Usually, these are contract-driven, so be sure to review the specific points. Some project-specific documents may also be gathered, as specified in the contract with the project owner. We’re going to start with the essential documents that you should collect from all your subcontractors, and then list some that are optional but may be required.

Contractor’s license

There’s nothing more important than verifying that your subcontractor is licensed to work in the state and city where the project is located. Not all states require licensing for subcontractors, so be sure to check the regulations first.

It guarantees that the subcontractor has insurance coverage, usually a small bond to cover disputes and claims, and that they are registered to work in that state. For trade contractors, licensing also assures a level of knowledge and education. Once you’ve checked it, make sure the license stays in good standing by regularly reviewing it to ensure that the insurance policies and bonds remain current.

Insurance certificates or proof of insurance

There are two types of business insurance that all subcontractors should have: general liability and workers’ compensation. These policies protect the business in case of theft, damage, or injury. You may also request proof of automobile insurance if the subcontractor has their own vehicles.

Take a look to see if the policy has not expired and that it has the appropriate claim limits as per the subcontractor contract. Your company may also be added as an additional insured to the sub’s policy, so make sure that is noted as well.

Men shacking hands.

W9 form

All subcontractors should be providing you with an IRS W9 form. This documentation lets you know the type of company the subcontractor is (corporation, LLC, sole proprietor, etc), as well as their tax identification number or Social Security number if they are an individual. You’ll need this information for the end-of-the-year reporting and sending 1099 forms to those subcontractors and suppliers.

Project bonds

Some projects, mostly government and public ones, may require performance and payment bonds. Not all general contractors ask their subcontractors to bond back the project, but if you do, you’ll want to get a copy of these bonds for your files. You’ll need proof that the bonds were issued, as well as the specific bond information, in case you or the project owner have to make a claim.

Optional subcontractor compliance documents

Your company may choose whether to collect and review additional documents or maintain only the essentials. If you do require them, you should include them in your subcontractor agreement form.

SDS / MSDS

Some general contractors require that all subcontractors turn in their SDS (safety data sheets) or MSDS (material safety data sheets) as part of their compliance package. The last one is required to be on each job site when a contractor uses chemicals or hazardous substances.

These are often job-specific, as each project requires different products. Subscriptions to MSDS services that provide a website or telephone number can substitute for providing paper documents.

Safety policies

Every subcontractor should have a safety manual or set of safety policies that they institute on their projects. Some general contractors require subcontractors to send those policies in, so they can be reviewed to verify that they comply with the general requirements.

Some of the key policies that need to be reviewed for the subcontractor statement include fall protection, personal protective equipment (PPE), silica protection, and health policies. All subcontractors need to comply with these requirements when it comes to health checks, PPE availability, and record-keeping.

Keeping it all organized with our help!

Contractors must track the receipt and expiration of these subcontractor documents to ensure that the contract complies at all times. General contractors should develop a system for verifying, recording, and following up on missing or expired information.

Accounting systems, like ours, can help by tracking insurance and license expiration dates, and providing automatic notification when they are expired. This makes compliance tracking easier by centralizing the data, providing notifications, and allowing contractors to be proactive in tracking down information.

This helps general contractors ensure that their compliance information is up-to-date, reducing project risk. If you also need subcontractor contract templates, our software can provide them in seconds. Contact us and get started with Premier Today!