We used weight to calculate progress not only on procurement progress. We called it Rules of Credit or production steps. If the rules of credit were approved by the client, it helps the contractors financial cash flow and allow to claim progress partially. Let's use procurement as per your example. (note: this is only to explain the theory and not assuming the rules of credit is correct)
As per example:
1) Pipes = 1000
2) Pump = 4000
3) Pressure vessel = 5000
Total = 10,000
Using the rules of credit mention above:
Let say the Pipes delivery is 3 months, Pumps delivery is 6 months and Pressure Vessel delivery is 8 months
If the procurement items is being paid only by the client after deliveries then the contractor won’t get paid until the said items is delivered. Using Rules of Credit (weighting) approved and agreed by the client, the contractor can partially bill the client even the items are not yet delivered.
Ex: if the Pipes has been enquired to suppliers and has been substantiated by the contractor to the client, then the contractor is entitled to claim 10%. This will be the same to other items and or other rules of credit that had been completed and substantiated.
Because the contractor already spend cost paying the procurement person to expedite the PO, using rules of credit, the contractor can cover the cost expended by claiming partially to the PO even the items was not yet delivered.
Member for
10 years 7 monthsYes. Thank you. Very nice.
Yes. Thank you. Very nice.
Member for
19 yearsHi Sharjeel,We used weight to
Hi Sharjeel,
We used weight to calculate progress not only on procurement progress. We called it Rules of Credit or production steps. If the rules of credit were approved by the client, it helps the contractors financial cash flow and allow to claim progress partially. Let's use procurement as per your example. (note: this is only to explain the theory and not assuming the rules of credit is correct)
As per example:
1) Pipes = 1000
2) Pump = 4000
3) Pressure vessel = 5000
Total = 10,000
Using the rules of credit mention above:
Let say the Pipes delivery is 3 months, Pumps delivery is 6 months and Pressure Vessel delivery is 8 months
If the procurement items is being paid only by the client after deliveries then the contractor won’t get paid until the said items is delivered. Using Rules of Credit (weighting) approved and agreed by the client, the contractor can partially bill the client even the items are not yet delivered.
Ex: if the Pipes has been enquired to suppliers and has been substantiated by the contractor to the client, then the contractor is entitled to claim 10%. This will be the same to other items and or other rules of credit that had been completed and substantiated.
Because the contractor already spend cost paying the procurement person to expedite the PO, using rules of credit, the contractor can cover the cost expended by claiming partially to the PO even the items was not yet delivered.
I hope my explanation is clear.