How to Run a Commercial Build Project: From Contract Award to Final Account

What you will learn

• How to build a prelims register from day one, splitting time-related and fixed costs with weekly rates that protect your entitlement on extension of time claims.
• What a job record should contain at contract award stage before any supplier or sub-contractor is booked.
• The variation order disciplines that prevent verbal site instructions from becoming unrecovered cost.
• How to structure a payment application schedule and schedule of values that keeps cash moving throughout the project.
• When to issue retention invoices and how to track DLP end dates so the second release does not slip past unnoticed.
• Why sub-contractor cost reconciliation before each client billing application is the most direct lever on job-level margin.

Commercial contractors running on 4-6% net margins (Siana/JMCO 2026) cannot afford to lose money at any stage of a project. Yet most margin erosion on commercial builds is not a single catastrophic failure - it is the compounded effect of six or eight operational disciplines done partially or inconsistently: a prelims section priced as a flat percentage rather than built line by line, a sub-contractor invoice arriving after the client has been billed, a variation agreed verbally and never captured, a retention invoice that waits three months past the practical completion trigger.

This playbook covers each phase of a commercial build - from contract award to final account closure - and sets out the specific disciplines that protect margin at each stage. The reader leaves with a repeatable operational framework that applies to any fixed-price or GMP commercial contract.

Key Takeaways

• How to build a prelims register from day one, splitting time-related and fixed costs with weekly rates that support delay recovery claims.
• What a job record should contain at contract award stage - before any supplier or sub-contractor is booked.
• The variation order disciplines that prevent verbal site instructions from becoming unrecovered cost.
• How to structure a payment application schedule that keeps cash moving throughout the project.
• When to issue retention invoices and how to track DLP dates so the second release does not slip past unnoticed.
• Why sub-contractor cost reconciliation before each client billing is the single most direct lever on job-level margin.

Phase 1: Contract Award and Scope Confirmation

The first 48 hours after contract award determines whether the project has a clean cost baseline or inherits ambiguity that compounds throughout delivery. Before mobilizing any resources, three documents need to be in place.

The job record is the central reference for everything that follows. At contract award it should contain: the contract reference and value, the client billing entity (exact legal name), payment terms, retention rate and trigger dates, the contract programme with float declared per phase, and the names of the sub-contractor packages to be procured. Any field left blank at this stage will need to be answered later under time pressure - and time pressure is when mistakes are made.

The scope confirmation document defines what is included and what is explicitly excluded. On a lump sum contract this maps to the specification and drawings. On a GMP contract it sets the boundaries within which variations will be assessed. Every provisional sum should be listed with its value and the instruction process required before the work can proceed. Uninstructed provisional sums are a direct route to cost being incurred without a billing mechanism.

The programme issued at contract award needs to show more than the overall project timeline. Float should be declared per phase rather than hidden in a buffer at the back end. Sub-contractor mobilization dates, materials delivery windows, and inspection or certification dependencies should all appear. A programme that shows only start and finish dates gives no basis for variation time impact pricing later.

1. Create the job record and populate all contract fields before issuing any POs or booking confirmations.
2. Prepare the scope confirmation document with a full inclusions and exclusions list and a provisional sum register. Send to the client for written acknowledgment within 5 working days of contract signature.
3. Issue the contract programme with float declared per phase and sub-contractor mobilization windows marked.

Phase 2: Prelims Build-Up and Site Mobilization

Preliminaries - the project-wide indirect costs that do not end up in the finished structure - typically account for 8-12% of a commercial new-build contract value (Plexapro 2025). A 2024 industry study found that inadequate prelims contributed to 68% of failed or delayed commercial projects, with an average financial impact of 12% of total project value. On a 4-6% net margin business, that is not a rounding error.

The mistake most general contractors make is pricing prelims as a single percentage applied to the contract value. This works on simple residential jobs. On commercial builds, it produces a figure that looks competitive at tender and becomes a loss driver during execution.

Build prelims line by line. Every item should appear separately: site management salaries, site office costs, crane hire, welfare facilities, hoardings and security, temporary power and water, insurances, compliance and H&S management, demobilization, and final clean. Each item should be classified as either time-related or fixed.

Time-related items - the site manager's salary, crane standing time, temporary facilities running costs - accumulate for the duration of the project. These should carry a weekly rate next to each line, not a lump sum. If the programme extends by 8 weeks because of a client-caused delay, the weekly rate on each time-related item is the mechanism for recovering that cost through an extension of time claim. A lump sum gives no basis for the claim.

Fixed items - site establishment, mobilization, final demobilization - are one-time costs regardless of duration. Claim establishment costs in the first payment application. Log demobilization as a separately tracked line to claim at practical completion.

The prelims register is a live document from day one. Each priced line from the tender becomes a row: budget, committed cost to date, actual cost to date, forecast to complete. Review it monthly with the contracts administrator. Time-related items running ahead of budget signal a programme slip before it becomes visible in the project programme itself.

1. Build the prelims schedule as a separate document with each item listed individually as time-related or fixed, with a weekly rate next to every time-related item.
2. Set up the prelims register on the job record with the same line structure as the priced prelims. Record committed costs as bookings are placed, not on invoice receipt.
3. Include establishment costs in the first payment application with reference to the priced prelims schedule.
4. Review the prelims register monthly and forecast to completion. Flag any line running more than 10% over budget before the next payment application is prepared.

Phase 3: Procurement and Sub-Contractor Mobilization

On a commercial build, sub-contractors typically account for 15-25% of total project cost (Siana 2026). Managing that spend without formal controls is the fastest route to losing margin before a single variation is raised.

One PO per trade package. Each sub-contractor engagement needs a formal purchase order referencing the job number, the scope of works, the agreed price or day rate with cap, retention terms, programme mobilization dates, and payment terms. Verbal agreements give no price protection and no basis for retention withholding.

Written booking confirmations go out before the PO. For each trade, the booking confirmation sets the mobilization date, scope of works in writing, fixed price or day rate, overtime threshold, and the retention clause. The PO follows within 2 working days of the booking confirmation being accepted.

For direct materials, raise one PO per supplier per delivery per job with a job reference on every line. Confirm the agreed price before raising the PO. A verbal re-quote without a locked PO means no price protection if the supplier invoices at a higher rate.

Written acknowledgment within 2 working days. Any PO not acknowledged in writing within 2 working days should be chased by the contracts administrator. An unacknowledged PO is not a confirmed order.

Phase 4: On-Site Operations - Variation Discipline and Cost Capture

Most margin erosion on commercial builds is not from a single large loss - it is from a pattern of small costs absorbed that should have been billed. Two disciplines address the majority of these leaks directly.

Site instruction log from day one. Any verbal instruction from the client, the client's representative, or the design team is logged on the same day it is issued. The log records the date, the person who gave the instruction, the nature of the change, and the contract section affected. This log is the basis for every variation claim and every time impact notice. Without it, the only evidence of a verbal instruction is the memory of whoever was on site that day.

Written variation before proceeding. Any change to scope - client-directed or found on site - that adds cost above the internal minimum threshold (typically $150-$200) requires a written variation order before work proceeds. The variation states the scope in plain terms, the cost priced at fully burdened rates, and any programme impact as a separately stated line. Written approval from the client or their representative is required before work starts. Verbal approval is not written approval.

Labour tracked by phase, not project total. Labour cost captured against a project total is not useful for margin control. Labour should be tracked against the phase or trade section - groundworks, structure, first fix, second fix - so that slippage against the original estimate is visible within that phase while it is still recoverable. A 15% labour overrun on first fix caught in week 3 can be addressed. The same overrun identified at practical completion cannot.

Sub-contractor cost capture before client billing. Every sub-contractor invoice must be matched to its PO and a completion sign-off before the client is billed for that package. A sub-contractor invoice that arrives after the client billing has been submitted is a cost not included in the progress claim - absorbed silently on the next application.

1. Set up the site instruction log on the job record before mobilization. Assign one named person to maintain it.
2. Set the internal variation threshold in writing at the start of the project. Issue a variation order for every instruction above the threshold before work proceeds.
3. Track labour against phase milestones, not the project total. Flag any phase more than 10% over estimate before that phase is closed.
4. Require all sub-contractor invoices within 5 working days of completion sign-off. Reconcile against the PO before raising any client billing that includes that package.

Phase 5: Stage Billing Discipline

Commercial contractors wait an average of around 90 days to be paid on construction invoices (Rabbet 2024 Construction Payments Report). On top of that, 5-10% of each progress payment is withheld as retention. Without active billing discipline, the working capital gap becomes structural.

Set the payment application schedule at contract award. Whether the contract runs on monthly interim applications or milestone-based triggers, the dates belong in the job record before the project starts. Monthly applications should go out on a fixed day each month - not when the contracts administrator gets around to it - with supporting documentation assembled the week before.

Build the schedule of values at the start. The schedule of values breaks the contract sum into measurable components: each trade section, the prelims, and approved variations to date. Each application updates the cumulative value of work completed against each line. A schedule of values built mid-project is harder to defend and inconsistent in how items are valued.

Track retention on every application. Retention at 5-10% of each progress payment is deducted by the client on receipt. The cumulative retention balance should appear as a named line on the job record. At 5% retention on a $500,000 commercial contract billed across 10 monthly applications, the retention balance at practical completion is $25,000. Across a portfolio of 8-10 active projects, the total retention held is a material receivable that needs visibility, not a mental note.

Sub-contractor cost reconciliation before each application. Before submitting any payment application to the client, confirm that all sub-contractor costs for the work included in that application have been received and matched to their POs. An application that includes value for work whose cost has not yet been captured will show a healthy interim margin that disappears when the invoice arrives.

Phase 6: Practical Completion, Final Account, and Retention Release

Practical completion (PC) triggers three outcomes simultaneously: the defects liability period begins, liquidated and ascertained damages stop accruing if applicable, and the first tranche of retention becomes due. None of these outcomes are automatic. All of them require a written PC certificate issued by the contract administrator or the client's representative.

The PC certificate is the retention invoice trigger. Raise the 50% retention invoice on the same day the PC certificate is received. Do not wait for the client to process it or confirm receipt before raising the invoice. A 3-day delay in raising the retention invoice on a $600,000 contract at 5% retention ($15,000 at 50%) may appear minor. Across a portfolio of 10 active projects at similar values, consistent delay compounds into a significant uninvoiced balance that is invisible unless retention is tracked as a named receivable per job.

Log the DLP end date at PC. The DLP is typically 6-12 months on commercial contracts, though it can extend to 24 months on complex or specialist projects. On the day the PC certificate is received, log the DLP end date in the job record and set a reminder 30 days before the end. The second 50% retention release requires a formal application at DLP end. It cannot be raised until all defects notified during the DLP have been resolved and signed off in writing.

Keep a defect log through the DLP. Any defect notified by the client during the DLP should be logged, assigned a resolution date, and closed in writing when rectified. An unresolved defect log at DLP end will block the final retention release. Defects resolved verbally and never signed off remain open in the client's view even if the work was completed.

Submit the final account within 60 days of PC. The final account is the agreed settled value of the contract including all approved variations, adjustments to provisional sums, and any extension of time entitlement for delay costs. It should be submitted within 60 days of practical completion - before the memory of site instructions fades and before the client's team moves its attention to the next project. A final account submitted 6 months after PC is significantly harder to negotiate.

Reconcile all sub-contractor costs before the final account. Before submitting the main final account, confirm that all sub-contractor invoices have been received and matched to their POs. Sub-contractor retention should also be reconciled at this stage. The main contractor holds sub-contractor retention at the same rate the client holds the main contractor's retention. It should be released proportionally when the client releases retention on the equivalent works package.

1. On receipt of the PC certificate, raise the 50% retention invoice the same day with explicit reference to the PC certificate date and contract reference.
2. Log the DLP end date in the job record and set a 30-day advance reminder.
3. Maintain a defect log through the DLP. Close each resolved defect in writing.
4. Submit the main final account within 60 days of practical completion, including all approved variations and provisional sum adjustments.
5. Reconcile all sub-contractor costs and sub-contractor retention against the final account before submission.
6. At DLP end, confirm all notified defects are closed in writing, then raise the final 50% retention invoice.

Managing the Project Lifecycle in Zigaflow

Zigaflow connects the job record, purchase orders, works orders, delivery notes, and invoices that make up a commercial project's financial backbone. Stage invoices - including retention invoices at PC and DLP end - are raised directly from the job record, with the retention balance visible as a named receivable rather than a figure calculated at month-end from memory. Accounting sync to Xero, QuickBooks, or FreeAgent means the final account position is current in real time.

For businesses running four or more active commercial projects, the prelims register, variation log, and retention tracking that typically live in separate spreadsheets can be managed within a single job record. The audit trail that supports payment application submissions and extension of time claims is built as a byproduct of normal operation, not as a separate documentation task at the end of each phase.

Running a Commercial Build at a Margin Worth Protecting

Commercial building at 4-6% net margin means every discipline in this playbook is carrying weight. A prelims section priced without weekly rates absorbs programme delays that cannot be recovered. A verbal variation that is never written up is a cost absorbed and a billing never issued. A retention invoice not raised at PC is cash deferred for months without reason. A sub-contractor invoice that arrives after the client billing has gone out is margin lost silently.

The contractors who consistently protect margin on commercial builds do six things: they build the job record before mobilizing, they price prelims line by line with weekly rates on time-related items, they raise written variations before work proceeds, they track labour by phase rather than project total, they reconcile sub-contractor costs before each client billing, and they raise retention invoices on the day the trigger occurs. None of it requires unusual contracts or specialist systems. All of it requires consistent operational discipline applied to every project, regardless of size.

See it in Zigaflow