Public agencies: transparency requirements and the contingency log

A public agency on a CM at risk contract operates under rules a private owner never thinks about. The contingency log is a public record. The state auditor can ask for it. A council member can ask for it. A newspaper can ask for it. A losing bidder on the next project can ask for it. Every draw will eventually be read by someone who was not in the room when it was approved.

That changes what a good contingency entry looks like. For a private developer, a draw with a short note is probably enough. For a public agency, the entry has to explain itself to a stranger three years later. This post describes what that entry should carry and how the agency's own ledger makes it possible.

Why the contractor's log is not the agency's record

The construction manager keeps a contingency log because the contract requires it. That log lists draws by the contractor's cost codes, with the contractor's description and the contractor's view of the cause. It is a real document and it is useful. It is also the contractor's document, and it reads that way.

When the auditor asks why the agency allowed a $180,000 draw for mechanical coordination in month nine, the contractor's log says the draw was for mechanical coordination. The agency's record should say who at the agency reviewed it, what backup was provided, whether the cause was confirmed or disputed, whether it was a contractor contingency draw or an owner contingency draw, and what the remaining balance was afterward. That is a different document with a different purpose.

What every public entry should carry

Date of the draw, and date of the agency's review. Amount. Which fund: contractor contingency or owner contingency, because most public contracts treat them differently and the auditor will check. Cause, in the same four categories used for change orders: owner scope, design gap, unforeseen, coordination. Backup document reference. The name of the agency staff member who reviewed it, and the name of the approver where the contract requires owner approval. Running balance after the draw.

Two more fields matter for public owners. First, whether the backup was complete at the time of review, or whether the draw was flagged for missing support and approved anyway. Flagging a draw is not blocking it. It is recording that the agency saw a gap. Second, whether the cause was later changed, by whom, and why. A draw reclassified from coordination to design gap six months later is a normal event, but it has to leave a trail.

A fictional example

On a fictional $54 million county courthouse, the contractor submits a $95,000 contingency draw for added fire stopping at floor penetrations. The agency's project manager reviews it and notes the backup is a subcontractor quote with no reference to the drawings. The entry records the draw as approved, flagged for incomplete backup, cause provisionally set to coordination, reviewed by the named project manager. Four months later, the architect's response shows the penetrations were missing from the drawings. The cause is changed to design gap, with the date and the reason. When the auditor reads the entry, the whole story is there.

Transparency without slowing the project

Public agencies sometimes respond to transparency requirements by routing every contingency draw through a committee. That can take weeks and the contractor proceeds anyway, because the work cannot wait. The record then shows approvals dated after the work was done, which is worse for the agency than a fast approval with a complete entry.

A better approach is to keep the approval threshold in the contract, check your contract for what it is, and put the effort into the quality of the entry rather than the number of signatures. One staff member who reviews every draw within the contract's response period and records a full entry gives the auditor more than a committee that meets monthly.

Where a separate ledger fits

Most agencies keep the contingency record in a spreadsheet maintained by the project manager, separate from the agency's financial system and separate from the contractor's software. The spreadsheet is fine until the project manager is reassigned, or until the auditor asks for the history of a cause change and the spreadsheet only shows the current value.

Costwitness holds the agency's contingency ledger with every field above, keeps the history of every change to every entry, and raises a flag when a draw arrives without backup or without a cause. The agency staff still review, classify and approve. The record of their doing so is kept for them, in a form that can be produced in full when the records request arrives.

In the product

Contingency ledger, Change order register, Monthly owner report. Free tool: Contingency Runway, Pre-GMP Readiness Score.

Keep reading

Earlier: Healthcare owners: GMP contracts on phased construction in a working hospital. Later: Owner's representatives: one ledger per owner, one portfolio view for you. All articles on by owner type.