Quick Summary Series: Construction Auditing

Summary

In this video, Ben Evans and Jeff Ebert discuss construction auditing, a process that ensures compliance with contract terms and accurate billing in construction projects. They cover common risks associated with construction audits, including change orders, contractor compliance, budget risks, and safety regulations. The conversation highlights the importance of pre-payment and post-payment audits to identify and mitigate potential overcharges. Jeff shares insights into various cost categories and the self-funding nature of audits, emphasizing their cost-saving benefits. The session aims to inform viewers about effective strategies for managing construction project costs and ensuring compliance.

Takeaways

• 😀 Construction auditing helps ensure compliance with contract terms in construction projects.
• 😀 Ben Evans and Jeff Ebert highlight their extensive experience in supplier audits and legal aspects of construction.
• 😀 Change orders represent the highest potential risk for budget overruns and erroneous billing in construction projects.
• 😀 Various contract types, such as lump sum and cost-plus, influence the audit framework and billing expectations.
• 😀 Budget and design risks can lead to increased costs if not identified and managed early in the project.
• 😀 Cost containment is a primary focus of construction audits to prevent unnecessary expenses for owners.
• 😀 Liability and surety risks are mitigated by ensuring proper insurance policies and performance bonds are in place.
• 😀 Schedule risks are monitored through the examination of liquidated damages clauses to protect owners from delays.
• 😀 Quality and safety risks are addressed by ensuring materials meet specifications and safety regulations are followed.
• 😀 Construction audits are often self-funded, generating cost savings that exceed the audit expenses.

Q & A

What is the purpose of the Quick Summary Series by AutoText Solutions?

The Quick Summary Series aims to provide the audience with a brief, bite-sized conversation on key topics, allowing them to understand important concepts quickly.

Who are the main speakers in the video, and what are their backgrounds?

The main speakers are Ben Evans, President of AutoText Solutions, who has over a decade of experience in supplier audits, and Jeff Ebert, a subject matter expert in construction auditing with a background in audit, legal, and construction work.

What is construction auditing?

Construction auditing involves reviewing the various components of a construction project to ensure compliance with contract terms and to verify that contractors and subcontractors are billing accurately.

What are the two models under which construction audits can be performed?

Construction audits can be performed on a pre-pay basis, reviewing invoices before payment, or a post-payment basis, examining historical billings after payment has been made.

What is the highest potential risk identified in construction auditing?

The highest potential risk is related to change orders, which can lead to budget overruns and erroneous billings initiated by general contractors.

How do contractual risks impact construction audits?

Contractual risks determine the framework of the audit and dictate how billings are expected to be submitted. Different types of contracts, such as lump sum or cost-plus, influence audit processes.

What types of costs are typically reviewed in a construction audit?

Construction audits typically review various cost categories, including pre-construction costs, general condition costs, subcontractor costs, change orders, self-performed work, labor costs, equipment rental costs, and insurance and bond costs.

What is meant by the term 'self-funded audits'?

Self-funded audits refer to the concept that the savings generated from identifying overpayments or inaccuracies in billing typically exceed the costs incurred in conducting the audit.

What is the importance of safety and quality risks in construction auditing?

Safety and quality risks are crucial as they ensure that materials meet specifications and that safety regulations are followed, preventing potential accidents and future costs.

Can construction audits be performed without an audit clause in the contract?

Yes, construction audits can often be performed even if there is no specific audit clause in the contract, as the terms of the contract regarding billing must still be adhered to.