Subcontracts and commitment changes
How subcontracts and purchase orders are structured, how commitment change orders follow owner changes, and how sub invoices, retainage and compliance are checked against the commitment.
Partly in the app today. Items marked Planned are not built yet.
On this page
A commitment is the cost side of your contract with a trade partner or supplier. This page goes deeper than Commitments and change orders on how subcontracts are structured, how they change, and how invoices are checked against them.
What a commitment holds
Every commitment, subcontract or purchase order, is a record on the job. In the app’s Commitments tool it holds:
- Vendor and contract type (subcontract or PO).
- Original value and approved changes, which together make the revised commitment.
- A schedule of values of its own, each line charging to a cost code.
- Retainage terms: a default retainage percent. Reductions (for example, a lower rate after a set percent complete) are Planned.
- Compliance (Planned): insurance, lien waivers and certified payroll tied to the commitment. Today, insurance policies are tracked per vendor in company admin.
- Invoiced and retained to date, from the sub invoices entered against it.
Because the commitment shares the job’s cost structure, committed cost by cost code is always available next to budget and actual cost.
Subcontracts vs purchase orders
Used for trade partners who perform work on site, usually with labor. Billed by progress against a schedule of values, typically monthly, often on an AIA-style pay application. Retainage usually applies. Lien waivers and insurance are typically required with each payment.
On Riverside Medical, the mechanical sub’s subcontract carries the HVAC scope, and its change order for CO #14 is the cost side of the fire damper change.
Used for material and equipment purchases. Billed by quantity delivered at unit price. Receiving (a delivery ticket or a field confirmation) is the evidence the material arrived. Retainage is less common.
On Riverside Medical, PO-118 with Volt Electric charges cost code 26 Electrical, with $42,050 remaining in the sample data.
Commitment change orders
When the owner approves extra scope, the trades doing the work usually need matching changes. A commitment change order:
- Is created from the change event, as a potential change order on the subcontract or PO, so it carries the same origin and cost codes as the owner change. You can also enter a commitment change order directly on the commitment. See Change events and potential change orders.
- Updates the revised contract amount and the committed cost when approved.
- Follows the change order review flow: submit for review, then approve or reject. Approval limits by amount are Planned.
The most common gap in disconnected systems is the commitment change that never gets issued. The owner approved the change, the sub did the work, but the commitment still shows the original scope, so the sub’s next invoice exceeds it. Creating the commitment change from the same change event as the owner change closes that gap.
Some changes are commitment-only, with no owner change: a buyout adjustment, a scope moved between subs, a back-charge deducted from a sub’s contract. In the app these are commitment change orders entered directly on the commitment.
Checking invoices against the commitment (Planned)
Today, sub invoices are entered against their commitment line by line, with retainage calculated, and reviewed through their statuses. Automatic checks are Planned. Here is what they cover. The construction version of the three-way match checks:
| Check | Passes when |
|---|---|
| Commitment | A current commitment exists, including approved changes |
| Amount | Billed to date stays within the revised commitment |
| Progress | Billed progress by SOV line is verified by the PM |
| Retainage | Withheld per the commitment’s terms at this point in the job |
| Compliance | Required lien waivers and insurance are on file |
| Coding | Lines charge the commitment’s cost codes |
An invoice that fails a check is held with a reason, not rejected silently. On Riverside Medical, INV-4471 for $48,200 exceeds PO-118’s remaining $42,050 by $6,150. The likely cause is an approved owner change whose commitment change hasn’t been issued yet.
Retainage on subcontracts
Retainage is withheld per invoice at the commitment’s rate and tracked as withheld to date. Automatic reductions and release workflows are Planned. The owner side of retainage is covered in Pay apps, SOV and retainage. Our retainage calculator shows the math.
Agents
AP and Compliance agents are Planned. See Planned agents.
Keep exploring
Related across os.construction
- BlogThe 3-way match, explained for construction APThe textbook 3-way match is a purchase order, a receiving report and an invoice. Construction AP needs a version that works for subcontracts, progress billing, retainage and lien waivers. Here's what to match, and where it breaks.
- DocsCommitments and change ordersSubcontracts, purchase orders, owner change orders and commitment change orders, and how one change flows from the field to the contract, the commitment and the budget.
- DocsCommitments and sub invoicesSet up subcontracts and purchase orders with a schedule of values, change them with commitment change orders, and enter sub invoices with retainage.
- ExplainerBudget, commitments and cost: one ledger for the jobHow budget lines, subcontracts, POs and forecast to complete add up to estimated cost at completion in os.construction, on Riverside sample data.
- GlossaryThree-way matchAn AP control that checks an invoice against its purchase order and the receiving record before payment is approved.
- GlossaryAccounts payableMoney your company owes to subcontractors, suppliers and vendors for work, materials and services already billed.
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