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Manage Your Subs: Pay, Hold Back
How do I run a subcontractor from signed order to final payment, with changes approved and retainage held?
Issue the approved framing order, then create the sub's agreement from the same subcontract in Contracts so the framing is counted once. Check a change order with the what-if panel, which shows the effect on budget and finish date and saves nothing, and have the owner's rep approve it: the app does not let the submitter approve. For a payment application, the app works out retention and net due; approve the work, approve the payment, mark it paid; retainage stays owed to the sub and is released at the end. Retainage terms depend on your contract and law.
Follow the framing subcontract on the example duplex through its agreement, a change order, payment and retainage in OpenConstructionERP. Retainage terms and release requirements depend on the applicable contract and law.
In this video
- Issue the approved framing order in Procurement: the commitment goes out to the sub, and the budget does not move.
- Create the sub's agreement and link it to the same subcontract from Contracts, so the framing is counted once, not twice.
- Check a change order's impact with the what-if panel before it is approved, then let the owner's rep approve it: a second pair of eyes on every change.
- Take the sub's payment application: the app works out the retention and the net due. Approve the work, approve the payment, mark it paid.
- See the whole framing order move to actual on the budget.
- Review the example contract's retainage release conditions, then record its release.
You will produce
A framing subcontract with the order issued, the agreement linked to the award so it is counted once, a checked and approved change order, a paid application, and retainage held until release.
Transcript
0:00 The agreement
Every subcontractor runs on the same cycle: you sign the work, a change comes up, you pay for what is done, and you hold a little back until the end. This lesson runs your framing sub through it. Here's the plan. First, issue the framing order and sign the subcontract. Then check a change order's impact, and get it approved. Then pay the sub's application. Finally, hold back retainage until the end. The project manager signs the subcontract. The superintendent confirms the work on site. The sub sends its payment application, and accounts pays it. You raise the changes, and the owner's rep approves them. Open Procurement. Last lesson, you approved the framing order, and that committed the money. Now issue it to the sub, so the work can go ahead. The budget does not move. The order is a commitment, and now it is issued. Next, give the sub an agreement. It is where the sub bills you, period by period, and where retainage is held. Link it to the contract from the award, so the framing is counted once. Open Subcontractors, and the framing sub. In its scope of work, create a new agreement, and pick the same subcontract from Contracts. The value and the retention rate come with it, so check them. That link keeps the framing from being counted twice. Sign the agreement. The app commits its value. But back on the budget, framing still shows one commitment, because the agreement and the order are the same work.
1:29 Change order
A change comes up. The owner wants extra blocking in the kitchen walls, for the cabinets. The change order is in, with its cost, and it is waiting for approval. Open it in Change Orders. Before it is approved, check the impact. The what-if panel shows what the change does to your budget and your finish date, and nothing is saved. The owner's rep approves it, and its cost goes onto your project budget as a revision. The app will not let the person who submitted a change approve it, so every change gets a second pair of eyes.
2:03 Pay application
The framing is done, and the sub sends its payment application for the rest of the work. Enter the period and the amount. The app works out the retention and the net due. Approve the work, which is the site sign-off. Approve the payment, which is the finance sign-off. Then mark it paid. Back on the budget, the whole framing order now shows as actual, and nothing is left on order. The overrun from bid day is still there, in red.
2:30 Retainage
Retainage is money you hold back from each payment application, usually a few percent, as your guarantee the work is finished properly. It is still owed to the sub, so it counts in your costs. You release it at the end, in one piece, or in stages. Open the retainage tab. It shows what you have held from the framing sub. Hold it until the framing is signed off, then release it, and the sub is paid in full. That is the sub cycle: an order issued, an agreement linked to the award, a change order checked and approved, a payment application approved and paid, and retainage held until the end. Run your next sub through it. OpenConstructionERP is free and open source. Download it today and start working.
