Subcontracts: measure, certify, pay
You will be able to: List the checks before a subcontract is activated; Take a certificate from measurement to booked bill; Calculate retention with a cap, advance recovery and back-charges on a subcontract bill.
- Read not done yet
- Self-check: not taken not done yet
- Lesson complete not done yet
A subcontract has items, each on a node of the breakdown with a quantity and a rate, an agreement value, an advance percent, a retention percent and a retention cap percent. To activate it, the subcontractor's insurance and trade licence must be unexpired, it must have items, and the items must not add up to more than the agreement value. When active, each item shows on its node as a subcontract allocation.
Each certificate takes the quantity measured this period per item. The system refuses a cumulative quantity above the item quantity and a cumulative gross above the subcontract value. Retention is the retention percent of this gross, limited by the room left under the cap, where the cap is the cap percent of the agreement value less retention already held. Advance recovery is the advance percent of this gross.
- Measured: quantities entered.
- Site approved.
- PM approved: this needs the procurement approval right.
- Billed: the bill is booked as a purchase invoice with the retention as a negative line; the retention is held as a payable and the advance is applied.
Example subcontract: blockwork 2,000 m2 at 60 = 120,000, plaster 4,000 m2 at 35 = 140,000, painting 2,000 m2 at 70 = 140,000. Agreement value AED 400,000, retention 10%, cap 5% = AED 20,000, advance 10%.
| Line | Certificate 1 | Certificate 2 |
|---|---|---|
| Measured work | 1,500 m2 block, 2,000 m2 plaster | 500 m2 block, 2,000 m2 plaster, 1,000 m2 paint |
| Gross this period | 160,000 | 170,000 |
| Retention 10% (cap room) | 16,000 (20,000 left) | 4,000 (only 4,000 left; 10% would be 17,000) |
| Advance recovery 10% | 16,000 | 17,000 |
| Taxable (gross less retention) | 144,000 | 166,000 |
| VAT 5% | 7,200 | 8,300 |
| Bill total before advance | 151,200 | 174,300 |
If the certificate also carries a back-charge of AED 3,000 agreed as a price reduction (damaged glazing), it is a negative line on the bill: taxable 170,000 - 4,000 - 3,000 = 163,000, VAT 8,150, total 171,150. A back-charge that is not a price reduction is instead recharged to the subcontractor by a sales invoice.
Walk it through
- Compute the second certificate retention if the cap were 10% instead of 5%.
- Write which items would be refused if you tried to measure above their quantity.
- In the demo, open a project's Billing tab and look at the subcontract bills section.
Public demo company, sign in as admin / demoAdmin123. Data refreshes nightly.
- Activation needs live insurance and licence and items within the value.
- Retention = 10% of gross, limited by cap room; advance recovery = advance % of gross.
- Certificates move measured, site approved, PM approved, billed.
Check yourself
4 questions on this lesson. Not timed, not the exam, and you can try again. Score 60% or more, and read the lesson, to complete it.