- ACH
- Automated Clearing House — an electronic network for processing bank-to-bank transfers in the United States. ACH payments are commonly used for payroll, vendor payments, and recurring billing. They typically settle in 1–3 business days.
- Allowance
- A budget provision included in a construction contract for items that have not yet been fully specified or selected — such as fixtures, finishes, or appliances. The actual cost is reconciled against the allowance amount during construction.
- Budget Scope of Work
- A detailed description of all the work to be performed under a construction contract, including specifications, deliverables, and boundaries of responsibility.
- Carrying Costs
- Ongoing expenses incurred while a construction project is in progress — including insurance, property taxes, utilities, and loan interest. Shorter project timelines directly reduce carrying costs.
- Change Order
- A written amendment to a construction contract that modifies the scope of work, contract price, or project schedule. Change orders must be agreed upon by both the owner and contractor.
- CM at Risk
- Construction Manager at Risk — a delivery method where the CM is engaged during design to provide preconstruction services (cost estimating, constructability review) and then takes on construction risk, typically by providing a Guaranteed Maximum Price at an agreed design milestone.
- Construction Budget
- A detailed financial plan that outlines all anticipated costs for a construction project, broken down by trade, phase, or cost code. It serves as the baseline for tracking actual spending against projections.
- Construction Loan
- A short-term loan used to finance the building of a project. Funds are typically released in stages through draw requests as work is completed, and interest accrues only on the disbursed amount.
- Cost Plus
- A contract structure where the owner pays the contractor for actual construction costs plus an agreed-upon fee (either a fixed amount or a percentage). This model provides full cost transparency but shifts more financial risk to the owner.
- Cost to Complete
- The estimated remaining cost required to finish a construction project from its current state. Calculated by comparing the budget to actual spending and forecasting remaining expenses.
- Design-Bid-Build (DBB)
- A project delivery method where the owner completes the design, then solicits competitive bids from contractors, and finally awards the construction contract. Provides price certainty and straightforward bidder comparison, commonly used on public projects.
- Design-Build (DB)
- A project delivery method where a single entity handles both design and construction under one contract. Reduces coordination risk and can accelerate schedules, since design and construction can overlap.
- Direct Costs
- Expenses directly tied to the physical construction of a project — including labor, materials, equipment, and subcontractor costs. In a cost-plus contract, direct costs are reimbursed at actual amounts.
- Draw Request
- A formal request for funds from a construction loan, typically submitted as work is completed on a project. Draw requests include documentation of progress and are reviewed by the lender before funds are released.
- Drawdown
- The progressive release of construction loan funds as work is completed. Interest accrues only on the amount drawn, so the payment schedule directly affects total financing costs.
- Fixed Fee
- A contract structure where the contractor agrees to complete the project for a predetermined price. The contractor bears the risk of cost overruns but benefits from any savings. Also known as a lump-sum contract.
- General Conditions
- Indirect costs associated with running a construction project that are not tied to a specific trade — for example, site supervision, temporary facilities, insurance, and permits.
- General Contractor (GC)
- The primary contractor responsible for managing a construction project, including hiring and coordinating subcontractors, procuring materials, and ensuring work meets specifications and code requirements.
- GMP
- Guaranteed Maximum Price — a contract structure where the contractor guarantees the project will not exceed a stated maximum cost. If actual costs are lower, the savings may be shared between the owner and contractor.
- Hard Costs
- Direct construction expenses related to the physical building — materials, labor, equipment, and subcontractor costs. Distinct from soft costs like design fees, permits, and financing.
- Lien Waiver
- A legal document where a contractor, subcontractor, or supplier waives their right to place a mechanic's lien on a property, typically provided in exchange for payment.
- Open-Book Contract
- A cost-plus arrangement where the contractor shares full financial transparency with the owner — all invoices, subcontractor bids, and cost records are visible. Common in CM at Risk and design-build engagements.
- Owner
- The individual or entity that commissions and finances a construction project. The owner contracts with the general contractor and is ultimately responsible for project funding.
- Pay Application
- A document submitted by a contractor requesting payment for work completed, typically on a monthly basis. It details the percentage of work completed for each line item in the schedule of values.
- Preconstruction
- The planning phase before physical construction begins, including cost estimating, value engineering, constructability review, and scheduling. In CM at Risk and design-build, the contractor is often involved during preconstruction.
- Punch List
- A list of remaining work items and deficiencies that must be completed or corrected before a construction project reaches final completion. Typically compiled during a walkthrough at substantial completion.
- Retainage
- A percentage of each payment (commonly 5–10%) withheld by the owner or general contractor until the project is substantially complete. Retainage protects against defective work and ensures project completion.
- RTP
- Real-Time Payments — a payment rail that enables instant, irrevocable bank-to-bank transfers 24/7/365 in the United States. Unlike ACH, RTP transactions settle within seconds.
- Schedule of Values
- An itemized breakdown of a construction contract into individual line items with assigned dollar values. Used as the basis for tracking progress, processing pay applications, and managing subcontractor payments.
- Soft Costs
- Project expenses not directly related to physical construction — such as architectural and engineering fees, permits, inspections, financing costs, and insurance.
- Subcontractor
- A specialized contractor hired by the general contractor to perform a specific portion of the construction work, such as electrical, plumbing, or HVAC installation.
- Substantial Completion
- The point at which a construction project is sufficiently complete that the owner can use it for its intended purpose, even if minor punch-list items remain.
- Wire Transfer
- An electronic transfer of funds between banks, typically used for large or time-sensitive payments. Wire transfers settle same-day but carry higher fees than ACH.