Article #548 Why Real Estate Developers Should Implement the Policy of “No-Contract No-Pay” on Their Capital Construction Projects Delivery

One of the key challenges that faces every project owner including real estate developers is how to ensure that their actual spending or actual cost on each project does not exceed what has been budgeted for. Those entities need to control all invoices for which a payment need to be done. This control can be attained if there is a clear policy for not to accept any invoice if it was not against an approved contract agreement. This will ensure that all actual costs incurred against each project has been accounted for when the project was initially approved for execution.

Achieving this objective requires every project owner including real estate developers to start with an accurate cost estimate for their project investment. This estimate will evolve and will become more detailed as the project’s design evolves. The final approved definitive cost estimate will be the basis for establishing the baseline budget which is a must requirement for the approval to proceed with the project. The final approved definitive cost estimate will also become the basis for generating the bid packages that will be outsourced. This will enable comparing bids received with the cost estimate to verify that those estimates were accurate or not. The awarded commitment contracts values should be inline to what was estimated otherwise they will not be approved.

To ensure compliance with the “No-Contract No-Pay” policy, additional commitment contracts will be created for land purchase, permits, insurances, project management overhead, etc. In other words, all invoices expected for payments to be done against each specific project should be associated with a commitment contract. Those contracts could be internal contracts with the project owner or real estate developer own business units.

By enforcing this policy, the project owner can have a single report that captures all issued invoices against each project grouped by the commitment contract they are associated with. The report will provide an overall summary with the key information of each invoice whether it was an interim progress invoice or one-off invoice.


If additional details were needed to be reviewed for any of the submitted invoices, the report reader should be able to drilldown to review the details of the invoice transaction. The output form should also provide links to all documents associated with the invoice as well as details of who has reviewed and approved the invoice.

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Using a Project Management Information System (PMIS) like PMWeb, this can be easily achieved using out of the box ready to use business processes, forms and reports. Of course, those can be fully customized and configured to meet each organization own business processes and reporting requirements.

PMWeb cost code module will be used to create the cost breakdown structure (CBS) for which it will become the basis for consolidating and reporting all cost-related project information. In addition, PMWeb cost estimate module will be used to either develop the project’s cost estimate or capture the imported estimate if it was done in another cost estimating application. The approved cost estimate will be used to generate the baseline budget as well as the procurement bid packages. Those bid packages will become the basis for issuing the invitation to bid, receive online bids and comparing received bid prices with the approved cost estimate to provide the recommendation to award the commitment contract to the qualified bidder.

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PMWeb commitment module will be used to capture the details of each awarded contract. In addition, PMWeb potential change orders and change orders modules will be used to capture the details of all potential change orders as well as well change orders whether they were approved, pending approval, withdrawn or disputed. Further, PMWeb progress invoices module will be used to capture details of all interim payment certificates as well as one-off payment invoices issued against each contract.

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Those awarded commitment contracts and their associated change orders as well as progress invoices will provide the input for the consolidated cost report which will also include details of the baseline budget as well as all adjustments made to the approved budget. PMWeb budget module will be the module where the budget generated from the approved cost estimate will be captured. PMWeb also allows creating the planned budget spending value to enable generating the earned value management (EVM) reports by comparing those planned values (PV) with the actual cost (AC) captured from the progress invoices. The earned value (EV) will be calculated form the updated project schedule percent complete values and the budget baseline values (BAC).

In addition, PMWeb budget request module will be used to capture the details of all adjustments made to the baseline budget. Those could include budget additions or omissions as well as transfers within the same project or between different projects.

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The report reader can drilldown and view the reported cost information at the desired cost breakdown structure (CBS) level. PMWeb cost code module allows defining up to 16 cost breakdown structure (CBS) levels for which each level could be 10 digits long.

For each cost breakdown structure (CBS) level the report will detail the original budget, budget changes, anticipated or revised budget, original commitments, commitments revisions, forecast to complete which will usually allow for potential changes, anticipated cost or revised commitment, variance between revised budget and revised commitment and actual cost or invoices received to date.

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For each of the business processes that were used in enforcing the “No-Contract No-Pay” policy, PMWeb allows attaching all supportive documents that are associated with each transaction of those business processes. Those could be certificates, drawings, agreements, insurance documents, pictures, factory-accepted testing, shipping documents, custom clearance documents, permits and others.

It is highly recommended to add comments to each attached document to provide better understanding of what was the document for. The attachment tab also allows the user to link other records for business processes implemented in PMWeb as well as associate URL hyperlinks with websites or documents that are not stored in PMWeb document management repository.

All those supportive documents need also to be uploaded into PMWeb document management repository so they can be stored and used. Those documents could be uploaded into folders or subfolders so they are better organized and secured. PMWeb allows setting access rights to each folder to identify the users who have access rights to view documents stored in a folder. In addition, PMWeb allows setting notifications for individuals to receive emails when new documents are uploaded or existing documents were downloaded or deleted.

To enforce accountability for each transaction of each business process detailed above, PMWeb workflow module will be used to create a workflow to formalize the review and approval tasks. The workflow will map the sequence of the review and approval tasks along with the role or user assigned to the task, duration allotted for the tasks, rules for returning or resubmitting a document and available for each task. The workflow also allows defining the alerts to be sent if there were delays in performing those tasks.

In addition, the workflow could be designed to include conditions to enforce the authority approval levels as defined in the Delegation of Authority (DoA) matrix. It should be noted that those will who be involved in those workflows could include other members of the organization that are not part of the project management team.

When a transaction of any of the business processes detailed above is initiated, the workflow tab for each business process template will capture the planned review and approve workflow tasks for each transaction as well as the actual history of those review and approval tasks. PMWeb will capture the actual action data and time, done by who, action taken, comments made and whether team input was requested.

The data captured from the workflow review and approval tasks will become the basis for monitoring, reviewing and reporting the status of those tasks to identify any delays in completing those tasks as was originally planned. The report can be configured to report on the workflow tasks by project and by business units. In other words, the report can be filtered to show only those tasks that relate to invoices review and approval.

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About the Authorfounder

Bassam Samman, PMP, PSP, EVP, GPM is a Senior Project Management Consultant with 40-year service record providing project management, project controls services and project management information system to over than 200 projects with a total value in excess of US $100 Billion. Those projects included Commercial, Residential, Education and Healthcare Buildings and Infrastructure, Entertainment, Hospitality and shopping malls, Oil and Gas Plants and Refineries, Telecommunication and Information Technology projects. He is thoroughly experienced in complete project management including project management control systems, computerized project control software, claims analysis/prevention, risk analysis/management (contingency planning), design, supervision, training and business development.

Bassam is a frequent speaker in topics relating to Project Management, Strategic Project Management and Project Management Personal Skills. Over the past 40 years he has lectured at more than 350 events and courses at different locations in the Middle East, North Africa, Europe and South America. He has written more than 500 articles on project management and project management information systems that were featured in international and regional magazines and newspapers. He is a co-founder of the Project Management Institute- Arabian Gulf Chapter (PMI-AGC) and has served on its board of directors for more than 6 years. He is a certified Project Management Professional (PMP) from the Project Management Institute (PMI), a certified Planning and Scheduling Professional (PSP) and Earned Value Professional (EVP) from the Association for the Advancement of Cost Engineering (AACE) and Green Project Management (GPM).

Bassam holds a Masters in Engineering Administration (Construction Management) with Faculty Commendation, George Washington University, Washington, D.C., USA, Bachelor in Civil Engineering – Kuwait University, Kuwait and has attended many executive management programs at Harvard Business School, Boston, USA and London Business School, London, UK.


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