Since a project can have hundreds of PO’s attached to it, they can commonly become lost or jumbled during a project’s lifetime. The reference number is one of the most important pieces of the construction purchase order-it helps track the document.
If “FOB Destination” is agreed upon, the SC will be responsible for any damage incurred to the mixer until it reaches the job site. If “FOB Origin” is agreed upon, the GC will become responsible for any loss or damages incurred to the mixer as soon as it leaves the warehouse and is in transit to the job site.
The delivery method for that mixer will typically be defined as one of two FOB (Free On Board) shipping terms: FOB Shipping Point (or FOB Origin) and FOB Destination. One of John’s deliverables in the PO is an extra concrete mixer that has to be shipped from out of state. These dates will inform the date of delivery of those deliverables. Now that the parties have agreed to the terms of payment, Jane and Johns’ teams will decide on due dates for the deliverables requested in the PO. In this scenario, we will say that Jane approves a PO with a net 30 term, which means John will be paid within 30 days of submitting an invoice for the completed work. It defines how many days after an invoice is submitted the buyer has to make the payment. The terms of payment can also be set in regards to a net payment term. This protects the GC in the event that payment is given before the completion of the project. The GC sends the PO to the SC to request a service on credit. The terms of payment for a construction purchase order are usually based on credit. the SC gets paid for the items needed to complete the work requested.Īs Jane’s team lays out the itemized list of deliverables requested by John’s team, the two parties will agree on a cost per item and possible discounts for certain quantities of those items.the GC receives the amount and quality of work requested.This document, therefore, protects both parties by ensuring that: This is important because a PO explicitly states the GC’s fiscal responsibility for the deliverables needed to complete the work expected of the specialty contractor.
Number of DeliverablesĪs Jane’s team is drafting the PO, they have to be diligent with listing the quantities for each deliverable provided by John. Once he relays that information to the GC, Jane’s team will draft a PO for the deliverables outlined by John and his team. They identify the tools, equipment, materials, and labor needed to complete the project. Upon receiving the bid for the concrete pour, John and his team visit the site. Let’s say Jane is a project manager at a GC hired to build a warehouse while John is a concrete contractor who won the bid to pour the foundation of that warehouse. In order to illustrate the contents of a construction purchase order and how they are relevant to the completion of a project, let’s use a hypothetical scenario featuring Jane and John. Chapter 1 What Information Does a Construction Purchase Order Contain?