Owner's Cost Management Representative

Owners of construction projects rely on ResX's Cost Management Rep. services to oversee some, or all, areas of construction cost management, including pay applications ("PA's"), change order ("CO's"), budgets, and field documentation.

Developers and owners of construction projects (collectively "Owners") frequently focus on design, construction quality, and schedule, and neglect to focus on construction cost management. ResX is available to fill this void by acting as the Owner's Cost Management Representative. As the Owner's Cost Management Rep., ResX will assume responsibility for tasks such as:

• Processing and approving the contractor's monthly invoices ("Pay Applications' or "PA's").
• Analyzing and approving change orders ("CO's").
• Monitoring the contractor's compliance with subcontractor bidding and selection procedures.
• Monitoring the use of contingency dollars.
• Confirming the cost of Allowance items.
• Tracking Buy-out savings.
• Tracking changes in the Schedule of Values ("SOV").
• Confirming compliance with the Owner's field documentation requirements.
• Monitoring compliance with the project's overall budget.

Owners rely on ResX because we have superior experience, knowledge, and technology in the field of Construction Cost Management. ResX can provide critical cost management services at a level that exceeds the Owner's capability and at a cost that is far below the cost of performing this service with the Owner's in-house staff. ResX will design, implement, and manage your construction project's financial controls, including advising you with regard to key contract clauses,[1] PA and CO processing procedures, and field reporting requirements.

Owners that engage ResX to provide Cost Management Rep. services have greater assurance that charges billed by the contractor are in compliance with the contract, and that the PA's are complete, accurate, properly documented, and properly maintained in permanent files. Gaining assurance in the PA requires that the Owner also has assurance that the underlying elements of the PA are properly managed, such as CO's, allowances, contingency accounts, buy-out savings, shared savings, and the cost tracking documentation from the field.

Our Construction Cost Management Rep. services relieve the Owner of management of high risk accounting tasks while giving the Owner assurance that key elements of its cost management processes (e.g., PA's, CO's, contingency accounts) are professionally prepared, reviewed, tested, approved, and tracked. Specifically, ResX will protect the Owner from overpaying for construction services by:

• Negotiating with the contractor to establish the procedures it is to follow when submitting a PA to the Owner.
• Monitoring the contractor's compliance with the agreed upon PA submittal procedures, including required inclusions such as signatures, lien waivers (conditional and unconditional), status reports, change orders, and subcontracts forms.
• Testing the accuracy of the calculations underlying the PA such as, fees, taxes, and insurance markups.
• Auditing the underlying support for costs included in the contractor's PA, including field documentation, payroll records, supplier invoices, and subcontractor invoices.
• Tracking Owner payments to protect against paying twice for the same service.
• Reporting to the Owner the results of our PA review and recommending the amount approved for payment.
• Maintaining the files and ledgers needed to memorialize the contractors PA submittals, the results of our review and tests, and the payments subsequently issued by the Owner.
• Conducting a close-out audit of the contractor's PA's and recommending the final payment amount.

Common problems identified during ResX's Cost Management Rep. services:

• PA charges for costs that are not proven by accounting or field documentation.
• PA includes cost documentation (e.g., labor or material) for work incurred on a project other than your project.
• PA understates the amount paid previously, therefore overstating the amount currently due.
• PA package does not include lien waivers.
• PA charges for required insurance coverage that the contractor never purchased.
• PA overstates the percent complete.
• PA charges for costs that are not billable such as excluded home-office costs.
• PA has math errors such as charging fees on pass-through expenses.

Our Cost Management Rep. services can also be implemented after the project is started. This frequently occurs when the Owner loses trust in the contractor or when the Owner realizes that it does not have the administrative expertise in-house to effectively manage the elements of the cost management process. Additionally, the scope of our Cost Management Rep. services can be expanded beyond the construction contractor to include other service providers necessary to complete the construction project, such as architects, engineers, IT consultants, FF&E providers, or move managers.

[1] ResX is not a law firm and cannot provide legal advice. ResX can provide advice regarding the financial/accounting impact of certain contract clauses (e.g., cost of work, buy-out savings, PA processing procedures, contingency account rules, and bidding procedures) and we can work with legal counsel to draft or modify key contract clauses.