Construction Billing and Payment Verification Flashcards
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Read the first 6 Construction Billing and Payment Verification flashcards as text
A Schedule of Values (SOV) is primarily used in construction billing to:
Answer: Allocate the contract sum among work components for progress payment purposes
The SOV breaks the total contract price into line items corresponding to work components, forming the basis for calculating progress payment amounts.
When auditing a contractor's pay application, which document is most critical for verifying that work-in-place percentages are accurate?
Answer: Field inspector's or owner's representative's progress report
Independent field verification by the owner's representative confirms actual work-in-place quantities against the contractor's claimed completion percentages.
Overbilling on a construction project most commonly occurs when a contractor:
Answer: Bills for work not yet performed or materials not yet incorporated
Front-loading or billing for work or materials ahead of actual installation is the most prevalent form of overbilling in construction.
What is the purpose of a stored materials provision in a construction contract's payment clause?
Answer: To allow payment for materials delivered to the site or approved off-site storage before installation
Stored materials provisions permit progress payments for materials that have been delivered and properly documented but not yet incorporated into the work.
Which auditor procedure best detects duplicate billing of a single invoice across multiple pay applications?
Answer: Cross-referencing invoice numbers across all pay applications
Maintaining a log of invoice numbers and cross-checking them across all pay applications identifies instances where the same cost has been billed more than once.
Retainage in a construction contract serves primarily to:
Answer: Provide the owner financial leverage to ensure project completion and defect correction
Retainage withholds a percentage of each progress payment, giving the owner financial security that the contractor will complete all work and remedy deficiencies.