Flags raised and flags closed: a monthly list the board can act on
Most owner reports describe everything. A better report describes what changed and what needs attention. The tool for the second kind of report is a flag: a rule, applied to the owner's ledger, that fires when a condition is met. Contingency burn rate above percent complete. A change order unclassified for more than thirty days. A package bought above its GMP line. A pay application line billed more than a third ahead of observed progress.
A flag is not a finding. It is a prompt to look. The person who looks decides whether there is a cause worth acting on. Reporting flags as two lists each month, raised and closed, gives the board a short, specific agenda and a record of what was noticed and resolved.
What makes a good flag
A good flag has a rule that can be written in one sentence, a threshold the owner chose, a register it reads from, and an action that closes it. Contingency burn exceeds percent complete by more than ten points, read from the contingency ledger and the schedule, closed when the owner reviews the draw log and records a reason. A flag without a closing action stays open forever and becomes noise.
Flags should also be few. A report with forty flags is a report nobody reads. Eight to twelve rules, chosen for the risks of the specific contract, is usually enough. An owner with a large allowance exposure wants allowance decision deadline flags. An owner with a thin contractor contingency wants exhaustion date flags. The rules are the owner's choice and should be reviewed when the project changes phase.
The two lists
Flags raised this month: each one a line with the rule, the item, the figure that triggered it, and who is looking at it. Flags closed this month: each one a line with the rule, the item, the reason it closed, and the date. A flag that was raised in a previous month and is still open appears in a third short list, carried forward, with its age.
A fictional $49 million recreation center gives a sense of the scale. Month nine, flags raised: three. A buyout package awarded $140,000 over its GMP line. Two PCOs unclassified past thirty days. Contractor contingency burn twelve points above percent complete. Flags closed: two. An allowance decision deadline met, and a pay application line that had been billed ahead of progress brought into line after a site walk. Carried forward: one, a disputed change order open for four months. Six lines. A board can read them in a minute and ask about any one.
Why closed matters as much as raised
A list of only raised flags makes every month look worse than the last. The closed list shows the owner's team doing its job, and it records the reason each item was resolved. That record is what an auditor or a successor reads later.
Flags versus judgments
A flag says a rule fired. It does not say the contractor did something wrong, the architect made an error, or the owner's team missed something. Contingency burn above percent complete might be early procurement, a front loaded schedule of values, or a real overrun. Only a person who reads the draw log can say which. Keeping the flag and the judgment separate protects the owner in two ways. The flag is defensible because it is a rule. The judgment is attributable because a named person made it on a date.
This separation also keeps the contractor relationship workable. A flag is a neutral observation. Raising it in the owner meeting invites an explanation rather than a defense.
Keeping the flag history
Every flag raised, every closing reason, and every carry forward should be stored with the monthly snapshot. Over a project's life this becomes a log of every time the owner's ledger noticed something and what was done about it. It is the single most useful document for a closeout audit, for a dispute, and for the owner's next project.
Costwitness applies the owner's chosen rules to the ledger each month, raises the flags, and records who closed each one and why. The report's flag page is built from that record. The rules are the owner's, the closing reasons are written by the owner's team, and the software's role is to apply the rules consistently and keep the history.
What to set up this month
- Write down the eight to twelve conditions on your contract that you would want to know about the month they occur.
- For each one, name the register it reads from, the threshold, and the action that closes it.
- Add a flags raised and flags closed section to this month's report, even if you build the lists by hand.
- Keep the lists with the issued report so next month's carried forward list is accurate.
Questions on this
Who sets the thresholds for flags?
The owner, usually with the owner's representative. Thresholds depend on the contract, the phase, and the owner's tolerance. A threshold that fires every month on a healthy project is too tight. One that never fires is too loose. Review them at each phase change.
Should flags be shared with the contractor?
Most flags are worth raising in the owner meeting, because the contractor usually has the explanation. Some, such as a flag on the contractor's classification of a change, are better discussed internally first. The owner decides which flags go to the agenda and which stay in the owner's record.
What is the difference between a flag and an open item?
An open item is something unresolved, such as a pending change order. A flag is a rule that fired on the state of the ledger. An open item can exist without a flag, and a flag can fire on a closed item, for example a change order that was classified in a way the owner questions.
In the product
Monthly owner report, Contingency ledger, Change order register. Free tool: Contingency Runway, Pre-GMP Readiness Score.
Keep reading
Earlier: What to decide before the next report: the last page that matters most. Later: Lender draw requests and the GMP position they depend on. All articles on owner reporting.
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