Subcontracts: To Decrease a Commitment with a Change Order

In this activity, you will learn how you can decrease a project commitment by processing a change order with a negative amount.

Story

Suppose that on 4/22/2024, the ToadGreen company hires a subcontractor, Standard Hardware Company, to perform a part of work for the hotel that is being built by ToadGreen. Initially, both parties agree that Standard Hardware Company will install the watering system and prepare the area around the hotel to landscape design.

After some consideration, because of scheduling issues, ToadGreen has agreed with the subcontractor that the subcontractor will install only watering system communications, and another subcontractor will later handle the landscape preparation. When the subcontractor finishes its part of the work and sends an invoice to ToadGreen, ToadGreen’s project manager will create a bill and pay for the provided services. Then, project manager will process a change order to decrease the project commitment.

Acting as the construction project manager, you will process all the needed documents in the system.

Configuration Overview

In the U100 dataset, the following tasks have been performed for the purposes of this activity:

  • On the Enable/Disable Features (CS100000) form, the Construction and Change Ordersfeatures have been enabled.
  • On the Vendors (AP303000) form, the HARDCO (Standard Hardware Company) vendor has been created.
  • On the Projects (PM301000) form, the HOTEL project has been created.
  • On the Cost Codes (PM209500), the 02-510 (Underground - Water) and 02-990 (Landscaping Maintenance) cost codes have been created.
  • On the Stock Items (IN202500) form, the SUBCONTR non-stock item, which represents the work performed by subcontractors, has been created.

Process Overview

To record the work performed by a subcontractor for the project, you will create a subcontract document with the subcontractor specified on the Subcontracts (SC301000) form. Then on the Bills and Adjustments (AP301000) form, you will create a bill for the provided services, and remove the planned services that were not provided from the bill. You will create a payment for the bill on the Checks and Payments (AP302000) form. When all the work has been paid for, you will process a change order to remove the unprovided services from the subcontract. Finally, you will complete the subcontract on the Subcontracts form.

System Preparation

To prepare to perform the instructions of this activity, do the following:

  1. Create the COMMITMENT change order class as described in Change Orders for Commitments: To Create a Change Order Class.
  2. Launch the MYOB Acumatica website and sign in as construction project manager using the ewatson username and 123 password.
  3. In the info area, in the upper-right corner of the top pane of the MYOB Acumatica screen, make sure that the business date in your system is set to 1/30/2024. If a different date is displayed, click the Business Date menu button, and select 1/30/2024 on the calendar. For simplicity, in this activity, you will create and process all documents in the system on this business date.
  4. Open the Projects Preferences (PM101000) form, and on the General tab (General Settings section), select the Internal Cost Commitment Tracking check box to expose commitments and committed values in the project budget, and save your changes to the project accounting preferences.

Step 1: Creating a Project Commitment

To create a subcontract, do the following:

  1. On the Subcontracts (SC301000) form, create a subcontract, and specify the following settings in the Summary area:
    • Vendor: HARDCO (Standard Hardware Company)
    • Date: 1/30/2024
    • Start Date: 1/30/2024
    • Description: Watering system and landscape preparation work
  2. On the Details tab, add lines with the following settings.
    Inventory ID Project Project Task Cost Code Line Description UOM Ext. Cost
    SUBCONTR HOTEL 02 02-510 Watering system EA 350,000.00
    SUBCONTR HOTEL 02 02-990 Landscape preparation EA 242,000.00
  3. In the Summary area, in the Subcontract Total box, make sure that the total is 592,000.00.
  4. In the Summary area, click Remove Hold to assign the subcontract the Open status. The system creates commitments to the project.
  5. In the Summary area of the Commitments (PM306000) form, select HOTEL in the Project box and 02 in the Project Task box. Make sure other boxes are cleared, and on the Cost Commitments tab, review commitments that the system has created when you saved the subcontract with the Open status. There are two commitments:
    • The commitment with the SUBCONTR item and committed original and revised amounts of $350,000
    • The commitment with the SUBCONTR item and committed original and revised amounts of $242,000
  6. Open the Projects (PM301000) form, and in the Project ID box, select HOTEL. On the Cost Budget tab, for the budget lines with the 02-510 and 02-990 cost codes, notice that the committed open amount for these lines equals the amount of the lines of the subcontract that you have processed. The original committed values of each line equal to the revised committed values.

Step 2: Paying for the Performed Work

To create the bill to pay for the subcontractor work, do the following:

  1. On the Subcontracts (SC301000) form, open the subcontract that you have created earlier in this activity, and click Enter AP Bill on the form toolbar. The Bills and Adjustments (AP301000) form opens with the prepared accounts payable bill.
  2. On the Details tab, remove the line with the $442,000 amount.
  3. In the Summary area, click Remove Hold to assign the bill the Balanced status, and then click Release to release the bill.
  4. On the form toolbar, click Pay. The system prepares a payment and opens it on the Checks and Payments (AP302000) form.
  5. In the Summary area, click Remove Hold to assign the payment the Pending Print status, and on the form toolbar, click Print/Process,
  6. On the Process Payments / Print Checks (AP505000) form, which opens, click Process on the form toolbar to process the only selected line that corresponds to the prepared payment. The system opens the printable document for the check in a separate browser tab. Review the prepared document and close the tab.
  7. Navigate to the Release Payments (AP505200) form, make sure that the unlabeled check box is selected for the only line in the table, and on the form toolbar, click Process to release the AP payment.

    As a result, the payment and the payment application to the bill are released; the subcontract, the payment and the AP bill are assigned the Closed status and the appropriate transactions are posted to the general ledger.

Step 3: Adjusting the Project Commitments

To change the project commitments by using a change order, do the following:

  1. On the Projects (PM301000) form, open the HOTEL project and on the form toolbar, click Create Change Order. The system creates a change order for the project and opens it on the Change Orders (PM308000) form.
  2. In the Summary area, specify the following settings:
    • Class: COMMITMENT
    • Project: HOTEL (specified automatically)
    • Description: Adjustment to the subcontract (doors and frames)
  3. On the Commitments tab, add a new line with the following settings:
    • Project Task: 08
    • Cost Code: 08-200
    • Inventory ID: SUBCONTR
    • Quantity: 0
    • Amount: -442,000
    • Vendor: HARDCO
    • Commitment Type: Subcontract
    • Commitment Nbr.: Reference number of the subcontract that you have created

      When you specify the subcontract, the system automatically specifies New Line in the Status box thus indicating that a new line with the negative amount will be added to the subcontract.

  4. Save your changes to the change order.

    The Commitments Change Total in the Summary area must be equal to -$442,000.

  5. On the form toolbar, click Remove Hold to assign the change order the Open status, and then click Release to release the change order.
  6. On the Subcontracts (SC301000) form, open and review the subcontract for which you have processed the change order. On the Details tab, notice that the subcontract now includes the third line with the negative amount. In the Summary area notice that the Subcontract Total amount has been adjusted and is now $650,000.
  7. On the Finanical tab, make sure that the Unbilled Quantity and Unbilled Amount of the subcontract are now equal to zero.
  8. On the form toolbar, click Complete.

Step 4: Reviewing the Updated Commitments

To review the commitments that the system has updated based on the change order you have processed earlier in this activity, do the following:

  1. In the Summary area of the Commitments (PM306000) form, select HOTEL in the Project box and 08 in the Project Task box, make sure other boxes are cleared, and on the Cost Commitments tab, review the commitments that have been updated.

    Notice that the commitment that has been updated with the change order have nonzero Committed CO Amount.

    Figure 1. Project commitments updated with the change order


  2. On the Projects (PM301000) form, open the HOTEL project.
  3. On the Cost Budget tab, review the updated committed values of the cost budget in the line with the 08-200 cost code.

    Notice that the system has updated the revised committed amount in the line. This amount is calculated as the sum of the original committed amount and committed CO amount, and is equal zero.

  4. On the Commitments tab, review the list of subcontracts related to the project. Notice that the subcontract that you have processed now has the Order Total of 650,000.
  5. On the General tab (General Settings section) of the Projects Preferences (PM101000) form, clear the Internal Cost Commitment Tracking check box, and save your changes to the project accounting preferences.

You have finished processing a change order for the project commitment.