Contracts & Buyout

Commitment

Also known as: Subcontract / Purchase Order

A subcontract or purchase order — a signed agreement committing money to a subcontractor or supplier for a defined scope.

A commitment is the umbrella term for the contracts a general contractor issues downstream: a subcontract (for a trade's labor and materials) or a purchase order (for materials or equipment). Each commitment ties a dollar amount to a defined scope of work.

Commitments are the backbone of cost control. Their total is your committed cost; compared against the budget, that's how you know whether you've bought the job out at, under, or over your estimate. Change orders modify a commitment as scope changes over the life of the project.

Related terms

Buyout

The process of soliciting, leveling, and awarding subcontracts and purchase orders to turn a budget into signed contracts.

Change Order

A formal, signed modification to a contract that adjusts its scope, price, or schedule after it's been executed.

Schedule of Values

A line-item breakdown of a contract's total price, used as the basis for progress billing.

Prime Contract

The agreement between the project owner and the general contractor that defines the total scope, price, and terms.

Retainage

A percentage of each payment withheld until the work is substantially or fully complete, as security for performance.

From term to skill

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