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CONSTRUCTION CONSULTING | CONTRACT COST & PERFORMANCE AUDITS

This site is for construction clients seeking to retain a consultant in construction audits, performance audits, systems audits and/or construction cost control:

CONSTRUCTION COST AUDITS

Holloway Consulting is one of very few firms truly qualified to perform both types of construction audits, Cost Audits and Performance Audits, both of which help to ensure that our owner-clients will only pay for construction costs necessarily incurred by the contractor in the proper performance of the work. Our cost audits of private construction contracts are typically comprised of two related and sequential components:

  • Construction cost audits performed by accountants using Generally Accepted Accounting Principles to determine whether costs are allowable, allocatable and reasonable
  • Performance audits performed by construction managers and engineering professionals focusing on the source, necessity and causation of costs

The cost audit provisions of most GMP and cost-plus contracts provide remedy by allowing the owner to determine the periodic and final cost of the work. Holloway Consulting’s performance audits and cost audits address the owner, architect and contractor’s interests in determining the periodic and final cost of the work.

On many private projects, AIA Contract Document B141, in combination with A201 General Conditions, establishes the architect’s construction phase duties and obligations to the owner. These contract documents require the architect to notify the owner if the progress, quality or cost of the work appears inconsistent with the requirements of the contract. On projects where construction is performed under the A111 Cost-plus Contract, the architect has additional responsibilities, particularly those related to periodic progress payments, final payment to the contractor and related audits.

PERFORMANCE AUDITS

From the owner’s perspective, the implementation of cost audit provisions with regard to periodic contractor progress payment applications can serve to ensure that applications for payment are reasonable and properly supported, with the obvious objective of eliminating over-billing by the construction contractor. The elimination of over-billing protects the owner in the event of contractor default or termination and also mitigates excessive financing costs and/or loss of alternative investment revenue. A subsidiary benefit is derived in as much as the contractor has provided appropriate cost data periodically which facilitates and expedites the audit of the final cost of the work.

Irrespective of whether or not the owner elects to perform periodic progress payment audits, it is advisable for the owner to perform a final audit to ensure that costs billed by the contractor and that payments made by the owner are appropriate. This can be true even for Guaranteed Maximum Price (GMP) contracts where the contractor’s billings are less than or equal to the GMP amount.

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