Commitments and change orders

Change orders are where most margin is won or lost, and where disconnected systems hurt most. This page explains commitments, the two kinds of change orders, and how os.construction moves a change from the field to the books as one record.

Commitments

A commitment is money you have agreed to spend: a subcontract with a trade partner or a purchase order with a supplier. Each commitment has a vendor, a value, a schedule of values of its own and one or more cost codes it charges to.

Commitments matter because they are the earliest reliable signal of cost. Actual cost arrives when invoices post; committed cost is known the day you sign. A job where committed cost is already close to the revised budget, with work still unbought, is a job heading for fade.

On Riverside Medical, PO-118 with Volt Electric charges cost code 26 Electrical. Its remaining commitment is $42,050 in the sample data, which is why invoice INV-4471 for $48,200 gets flagged: it exceeds what is left on the PO by $6,150.

Two kinds of change orders

Construction has change orders on both sides of the contract:

• Owner change orders (prime contract COs) change what the owner pays you. They add to, or deduct from, the contract sum.
• Commitment change orders (subcontract or PO change orders) change what you pay a sub or supplier.

Most real changes involve both. The owner approves extra scope, and you issue matching changes to the trades doing the work. The gap between the two is your margin on the change.

Before either is approved, a change usually lives as a potential change (also called a change event, PCO or COR, depending on your tools and contract): something that may cost money, being priced and negotiated.

Following CO #14

Here is the Riverside Medical example end to end:

That last step is the point. In a disconnected stack, step 6 is four separate updates in at least two systems, done by different people on different days.

Pending, approved, billed

Every change has a status, and the gaps between statuses are where money leaks:

Status	What it means	Why it matters
Potential	Possible cost, not yet priced or agreed	Exposure the forecast should know about
Pending	Priced and submitted, waiting for approval	Work often starts before approval
Approved	Signed by the owner	Should hit budget and SOV immediately
Billed	Included on a pay app	Approved but unbilled work is underbilling

os.construction is designed to show those gaps per job and across the portfolio: approved changes not yet on a pay app, pending changes older than a set number of days, and work started on changes that are not approved.

Invoices against commitments

When a sub or supplier bills, the invoice is matched to its commitment:

• Within the commitment: coded to the commitment’s cost codes and routed for approval.
• Over the commitment: flagged, like INV-4471 against PO-118. The usual causes are an unapproved commitment change order (here, probably the work in CO #14) or a billing error.
• Retainage: retainage on subcontracts is withheld per the subcontract terms and tracked against the commitment.

The AP agent can do this matching and propose a hold or an approval, but it cannot post: a person approves. See The six launch agents.