register sheets for the job on which the labor or material was furnished (Entry 7, Form 19). Postings are in black in the payment column (Entry 8, Form 21). The total of all bills rendered for labor or material furnished to a subcontractor is deducted whenever his applications are paid. The deduction should generally represent only charges for labor and material furnished during the same period as that covered by the application. RELATION OF COLUMNS. The difference between the total contract and changes, $100,400, and the work done, $15,000, is the uncompleted portion of the subcontractor's contract, $89,400. As the Work Done column represents the credit to the subcontractor and the Paid column the charges against him, the difference between the two is the balance due him for work performed, $1,490. In practice this balance should be greater than the amount owing and deferred whenever the subcontractor has been given full credit for work done; if the retention is larger than this balance, the subcontractor has been paid part of the sum which was to be retained until final settlement and possibly the surety relieved (see Chapter VI). The amount owing and deferred is the sum, $1,500, obtained by taking that percentage of the total of the Work Done column, $15,000, which is represented by the retained percentage (10%) indicated on the account. No part of the balance is "deferred" in the month when the final payment becomes due and payable. The amount owing and payable prior to occurrence of Entries 7 and 8 is the total of the Work Done, $15,000, less the amount owing and deferred, $1,500, less $4,500 payments made, or $9,000. Subcontract Summary It is advisable to keep a subcontract summary when there are a large number of active subcontractors' accounts on different operations. This summary indicates quickly the general condition of all the subcontracts on any particular job and localizes trial balance differences. This summary consists of three columns: (1) Contract and Changes, (2) Work Done, and (3) Payments. The figures for Contract and Changes are postings made of the totals of the memorandum sheets. (See page 152.) The Work Done amounts are the totals of the Subcontractors' Application columns on the purchase register. Totals of the Subcontractors' Contra Charges columns on the purchase register and the total of the cash book payments are the basis of entries in the Payments column of the summary. Because the ledger accounts are themselves grouped by jobs, the trial balance automatically lists all balances so as to show the total owing to subcontractors on each one. This total equals the difference between the second and third columns of the subcontract summary for that job. The amount owing on each job is needed when preparing the statement of uncompleted contracts on hand (Chapter XIV). Cost-Plus Subcontracts If a contract is sublet on a cost-plus basis, the subcontractor should be required to submit whatever payrolls, receipted invoices, and other evidences of disbursement which may be necessary to support his statements of his actual costs in doing the work. A form of cost-plus subcontract appears in the Appendix (Form D). During the progress of the work, a daily field check of the hours earned by the subcontractor's workmen and the material and supplies furnished by him should be made on the works. Reports covering this checking are used to verify the payrolls and invoices submitted by the subcontractor. The method of making these checks of labor and material and the amount of time it is advisable to spend in such checking are both dependent upon the nature and the size of the subcontract and the amount involved. At the completion of the subcontractor's work and after a final bill has been submitted by him, a test audit should be made of the subcontractor's books dealing with the cost of the particular work covered by the cost-plus contract. Surety Bonds Surety bonds are frequently required from subcontractors to guarantee the faithful performance of their contracts. These bonds are predicated upon the terms and conditions of the contract between the general contractor and the subcontractors. These contracts give definite times and methods for making payments to subcontractors. Any payments made to a subcontractor on a basis or at times other than as provided for by the contract, will release the surety from liability for loss connected with such modification, unless the bonding company's consent is obtained prior to the time of making the payment. Written conditions in a subcontract must not be varied, except in writing and with bonding company's prior consent, if the bond is ever to be enforced. (See Chapter VI.) Payment for Materials Prior to Delivery When payments are made for materials prior to physical delivery to the general contractor, a fully detailed bill of sale should be secured from the subcontractor, together with such protection in the form of insurance or otherwise, as may be necessary fully to safeguard the general contractor's interests while the material is not in his possession and not under his control. Final Payments to Subcontractors Steps often taken prior to making final payment to a subcontractor are: (1) securing the architect's acceptance and approval of the work performed by the subcontractor; (2) obtaining a waiver of lien from the subcontractor; (3) ascertaining that subcontractor's guaranty against defective material or unskilful workmanship is the same as that given by the contractor to the owner (on long-term guaranties, maintenance bonds should be requested); (4) determining that all contra items have been charged to the subcontractor; (5) obtaining reasonable assurance that the indebtedness incurred by the subcontractor in connection with the work has been or is about to be discharged. Repairs to Work Minor defects sometimes develop after work has been completed and after all workmen have left the job. Care must be taken to see that such of these as result from work performed by subcontractors are either remedied by them or that reimbursement for the cost of making such repairs is made by them to the general contractor. Overpayments Failure of the ledger-keeper to have a record of all deduction orders can easily cause overpayments to subcontractors. The final statement of contract and changes should be carefully checked with the employee who issues deduction orders for work omitted. Settlements Other Than in Cash A subcontractor's agreement with a general contractor sometimes provides that part of his contract price is to be paid him in some form other than in cash. Generally, this has reference to his taking some bonds or other securities issued by the owner of the operation. When the securities are given to the subcontractor with coupons attached that cover an interest period beginning at some date prior to the date securities are delivered to him, he should be charged with the accrued interest from the beginning of the interest period to the date securities were delivered. The securities should be charged to him at the amount stipulated in his agreement, that is, the total charge against him should equal the sum of his contract and extras. Taking Over Subcontractor's Work It is sometimes necessary for the general contractor to take over the work of a subcontractor and either complete it himself or have someone else do so. This may result from the subcontractor's getting into financial difficulties or from his inability properly or promptly to perform the work. If he furnishes a surety bond, the surety should be consulted before final action is taken. It is generally advisable to secure legal advice in matters of this kind. Understanding Subcontracts A short outline for studying subcontracts is: 1. Become thoroughly familiar with all the printed text in the form used by the general contractor. 2. Know the provisions of the contract with the owner in so far as they affect work sublet. 3. Study the general conditions of the specifications for the particular job to which subcontract applies. 4. Read carefully whatever has been inserted in the printed form or stricken out. Description THE OWNER'S CONTRACT Ledger This ledger consists of loose-leaf sheets (Form 22), which show the details of the transactions with an owner and the |