Construction and Project-Based Industry Solutions
Introduction
Construction companies and project-based businesses face unique challenges in managing job costs, tracking change orders, monitoring labor productivity, ensuring prevailing wage compliance, managing subcontractor relationships, and maintaining project profitability. Construction accounting differs from standard manufacturing or distribution through job costing requirements, percentage-of-completion revenue recognition, retention billing practices, progress billing cycles, equipment cost allocation, and union labor compliance.
Construction-specific validation requirements include job budget controls and variance monitoring, change order approval workflows and cost tracking, subcontractor compliance verification (insurance, licenses, certifications), lien waiver management before payment release, certified payroll compliance for public works, equipment utilization tracking and cost allocation, progress billing and retention release validation, and project profitability analysis with early warning systems.
QUALIA Rule Engine enables construction companies to automate project management validations while maintaining profitability controls and regulatory compliance.
Construction validation requirements:
Job budget enforcement with variance thresholds
Change order approval and budget revision workflows
Subcontractor prequalification and compliance
Lien waiver collection before payment
Certified payroll for prevailing wage projects
Equipment cost tracking and allocation
Progress billing and retention management
Project profitability monitoring and alerts
Part 1: Job Budget Controls
Budget vs. Actual Monitoring
Construction projects require continuous monitoring of costs against approved budgets with variance alerts.
Validation Set: Job - Budget Variance Alert - OnModify
Rule 1: Detect Budget Overruns
Table: Job (167)
Source References:
1. Job Task (1001)
Link via: [167:1] = [1001:1]
2. Job Planning Line (1003)
Link via: [1001:1] = [1003:1]
AND [1001:2] = [1003:2]
3. Job Ledger Entry (169)
Link via: [167:1] = [169:1]Condition:
Action - Email:
To: project.manager@construction.com
CC: estimating@construction.com, finance@construction.com
Subject: BUDGET ALERT - Job [167:1] Over Budget
Body:
PROJECT BUDGET VARIANCE ALERT
Project: [167:1] - [167:3]
Customer: [167:CustomCustomerName]
Project Manager: [167:CustomProjectManager]
Budget vs. Actual:
Original Budget: $[SUM(1003:202)]
Actual Costs to Date: $[SUM(169:13)]
Variance: $[SUM(169:13) - SUM(1003:202)]
Percentage Over: [[SUM(169:13) / SUM(1003:202) - 1] * 100]%
Cost Breakdown by Phase:
[FOR EACH 1001:
Phase: [1001:2] - [1001:3]
Budget: $[SUM(1003:202 for this task)]
Actual: $[SUM(169:13 for this task)]
Variance: $[Actual - Budget]
% Complete: [1001:CustomPercentComplete]%
]
High Variance Cost Categories:
[LIST top 5 cost categories exceeding budget]
Required Actions:
1. Review actual costs for errors or misallocations
2. Identify cause of overrun (scope change, productivity, pricing)
3. Determine if change order recoverable from customer
4. Prepare revised budget forecast
5. Implement corrective actions
Project Status:
% Complete: [167:CustomPercentComplete]%
Estimated Cost to Complete: [Forecast remaining costs]
Projected Final Cost: [Actual + Estimate to Complete]
Projected Profit Margin: [[Contract - Projected Cost]
Rule 2: Prevent Commitment Over Budget
Validation Set: Purchase Order - Job Budget Check - OnRelease
Source References:
1. Job (167)
Link via: [38:CustomJobNo] = [167:1]
2. Job Task (1001)
Link via: [38:CustomJobNo] = [1001:1]
AND [38:CustomJobTask] = [1001:2]
3. Job Ledger Entry (169)
Link via: [1001:1] = [169:1]
AND [1001:2] = [169:2]Condition:
SUM(169:13) + [38:91] > [1001:CustomBudget]
Action - Confirmation:
Message:
PURCHASE ORDER EXCEEDS JOB TASK BUDGET
Job: [167:1] - [167:3]
Job Task: [1001:2] - [1001:3]
Vendor: [38:79]
PO Amount: $[38:91]
Budget Status:
Task Budget: $[1001:CustomBudget]
Costs to Date: $[SUM(169:13)]
Open Commitments: $[Sum of open PO amounts]
This Purchase Order: $[38:91]
Total Committed: $[Sum of all]
Available Budget: $[1001:CustomBudget - Total Committed]
Over Budget: $[Total Committed - 1001:CustomBudget]
Options:
1. Request budget increase via change order
2. Reduce PO amount to fit budget
3. Reallocate budget from other tasks
4. Obtain project manager override approval
[IF(Change order pending,
'Pending Change Order: ' + [ChangeOrder:No] + ' for $' + [ChangeOrder:Amount]
Part 2: Change Order Management
Change Order Approval Workflow
Construction change orders require approval based on amount and impact.
Validation Set: Change Order - Approval Requirements - OnRelease
Rule 1: Route for Approval Based on Amount
Table: Job (Custom Change Order Table)
Condition:
[ChangeOrder:Amount] > 25000
AND [ChangeOrder:Status] is 'Pending Approval'
AND [ChangeOrder:ApprovedBy]
Action - Message:
Type: Error
Message:
CHANGE ORDER APPROVAL REQUIRED
Change Order: [ChangeOrder:No]
Job: [ChangeOrder:JobNo] - [Job:Description]
Amount: $[ChangeOrder:Amount]
Approval Requirements:
$0 - $10,000: Project Manager
$10,001 - $50,000: Operations Manager
$50,001 - $250,000: VP Operations
$250,000+: Executive Committee
This change order requires: [Determine approver based on amount]
Approval Checklist:
☐ Scope of work clearly defined
☐ Cost estimate detailed and reasonable
☐ Schedule impact identified
☐ Customer approval obtained (if applicable)
☐ Subcontractor quotes attached
☐ Impact on project profitability analyzed
Submit for approval before proceeding.
Change Order Details:
Reason: [ChangeOrder:Reason]
Requested By: [ChangeOrder:RequestedBy]
Date Requested: [ChangeOrder:RequestDate]
Customer Change Order: [ChangeOrder:CustomerCONo]
Customer Approved Amount: $[ChangeOrder:CustomerApprovedAmount]
[IF([ChangeOrder:Amount] > [ChangeOrder:CustomerApprovedAmount],
'WARNING: Internal cost exceeds customer approved amount. Margin impact: $' + [Difference]
Rule 2: Validate Customer Approval for Billable Changes
Condition:
[ChangeOrder:Billable] is true
AND [ChangeOrder:CustomerSignature] is ''
AND [ChangeOrder:Amount]
Action - Message:
Type: Error
Message:
CUSTOMER APPROVAL REQUIRED FOR BILLABLE CHANGE ORDER
Change Order: [ChangeOrder:No]
Job: [Job:Description]
Customer: [Job:CustomCustomerName]
Amount: $[ChangeOrder:Amount]
Billable change orders require documented customer approval before work proceeds.
Required Documentation:
- Signed change order form
- Detailed scope description
- Itemized cost breakdown
- Schedule impact statement
- Terms and conditions acceptance
Customer Authorization:
[IF([ChangeOrder:CustomerPONo] is not '',
'Customer PO: ' + [ChangeOrder:CustomerPONo],
'No customer PO provided'
)]
Signature Required From:
Customer: [Job:CustomCustomerContact]
Title: [Job:CustomCustomerTitle]
Date: _____________
Working without customer approval risks:
- Non-payment for extra work
- Disputes over scope and cost
- Loss of profit on change work
- Relationship damage
Do not proceed with work until customer approval obtained and documented.
Change order approval form: [Template link]
Impact on Project Budget
Rule 3: Update Job Budget for Approved Changes
Validation Set: Change Order - Budget Revision - OnApprove
Condition:
[ChangeOrder:Status] is 'Approved'
AND [ChangeOrder:BudgetUpdated]
Action - Assign:
Target: [JobTask:CustomBudget]
Formula: [JobTask:CustomBudget] + [ChangeOrder:Amount]
Target: [Job:CustomRevisedContractAmount]
Formula: [Job:CustomRevisedContractAmount] + [ChangeOrder:CustomerApprovedAmount]
Target: [ChangeOrder:BudgetUpdated]
Formula: true
Target: [ChangeOrder:BudgetUpdateDate]
Formula: [T]
// Update job budget and contract amount with change order values
Then Send Email:
To: project.manager, estimating, accounting
Subject: Job Budget Updated - Change Order [ChangeOrder:No]
Body:
Job budget revised for approved change order.
Job: [Job:Description]
Change Order: [ChangeOrder:No]
Description: [ChangeOrder:Description]
Budget Impact:
Previous Job Budget: $[Original budget]
Change Order Cost: $[ChangeOrder:Amount]
Revised Job Budget: $[New budget]
Contract Impact:
Previous Contract: $[Original contract]
Change Order Billing: $[ChangeOrder:CustomerApprovedAmount]
Revised Contract: $[New contract]
Margin Impact:
Change Order Margin: [[CustomerAmount - Cost] / CustomerAmount * 100]%
Overall Project Margin: [[Revised Contract - Revised Budget]
Part 3: Subcontractor Management
Prequalification and Compliance
Construction companies must verify subcontractor qualifications before engagement.
Validation Set: Subcontract - Compliance Check - OnRelease
Rule 1: Verify Insurance Coverage
Table: Purchase Header (38)
Source References:
1. Vendor (23) - Subcontractor
Link via: [38:4] = [23:1]
Condition:
[38:CustomSubcontractWork] is true
AND ([23:CustomGLInsuranceExpiration] < [T]
OR [23:CustomAutoInsuranceExpiration] < [T]
OR [23:CustomWorkersCompExpiration] < [T]
Action - Message:
Type: Error
Message:
SUBCONTRACTOR INSURANCE EXPIRED
Subcontractor: [23:2]
Subcontract: [38:3]
Amount: $[38:91]
Insurance Status:
General Liability:
Limits: $[23:CustomGLLimits]
Expiration: [23:CustomGLInsuranceExpiration]
Status: [IF([23:CustomGLInsuranceExpiration] < [T], 'EXPIRED', 'Current')]
Auto Liability:
Limits: $[23:CustomAutoLimits]
Expiration: [23:CustomAutoInsuranceExpiration]
Status: [IF([23:CustomAutoInsuranceExpiration] < [T], 'EXPIRED', 'Current')]
Workers Compensation:
State: [23:CustomWorkersCompState]
Expiration: [23:CustomWorkersCompExpiration]
Status: [IF([23:CustomWorkersCompExpiration] < [T], 'EXPIRED', 'Current')]
Required Insurance Minimums:
- General Liability: $1,000,000 per occurrence / $2,000,000 aggregate
- Auto Liability: $1,000,000 combined single limit
- Workers Compensation: Statutory limits
- Additional Insured: [Company name] must be named
Actions Required:
1. Contact subcontractor for updated insurance certificates
2. Verify coverage with insurance carrier
3. Confirm additional insured endorsement
4. Update vendor master with new expiration dates
Cannot proceed with subcontract until insurance compliance verified.
Risk Management Contact: [Contact information]
Certificate of Insurance Form: [Template link]
Rule 2: License and Certification Verification
Condition:
[38:CustomSubcontractWork] is true
AND [23:CustomContractorLicenseNo]
Action - Message:
Type: Error
Message:
CONTRACTOR LICENSE REQUIRED
Subcontractor: [23:2]
Scope of Work: [38:CustomScopeDescription]
Contract Amount: $[38:91]
State law requires licensed contractors for:
- Electrical work
- Plumbing work
- HVAC installation
- General construction over $[State threshold]
Required Licenses by Trade:
[List required licenses based on work type]
Verify and enter:
- Contractor license number
- License classification/specialty
- Expiration date
- Issuing state
Unlicensed Contractor Risks:
- Violation of state contractor licensing laws
- No legal recourse for poor workmanship
- Potential fines and penalties
- Disqualification from prevailing wage projects
- Liability for injuries or damages
Verify license status: [State licensing board website]
Part 4: Lien Waiver Management
Conditional and Unconditional Waivers
Construction payments require lien waivers to protect against mechanics liens.
Validation Set: Vendor Payment - Lien Waiver Check - BeforePost
Rule 1: Require Lien Waiver for Progress Payments
Source References:
1. Vendor (23)
Link via: [Payment:VendorNo] = [23:1]
2. Vendor Ledger Entry (25)
Link via: [Payment:VendorNo] = [25:3]
3. Lien Waiver (Custom Table)
Link via: [Payment:DocumentNo] = [LienWaiver:PaymentNo]
Condition:
[23:CustomSubcontractor] is true
AND [Payment:Amount]
Action - Message:
Type: Error
Message:
LIEN WAIVER REQUIRED
Vendor: [23:2]
Payment Amount: $[Payment:Amount]
Payment Date: [T]
Construction payments require lien waivers to protect against mechanics liens.
Required Lien Waiver Types:
1. Conditional Waiver (for progress payments):
- Waives lien rights UPON payment receipt
- Use for checks not yet cleared
- Protects if check bounces
2. Unconditional Waiver (for final payment):
- Waives lien rights immediately
- Use only after payment verified/cleared
- Cannot be revoked
For This Payment:
Type Required: [IF(Final payment, 'Unconditional', 'Conditional')]
Time Period: Through [Payment date or previous period end]
Lien Waiver Must Include:
- Project name and address
- Owner name
- Payment amount
- Through date (period covered)
- Authorized signature
- Notarization (if required by state)
Obtain signed lien waiver before releasing payment.
State Requirements: [State-specific lien law reference]
Lien Waiver Form: [State-specific template]
Rule 2: Track Cumulative Waivers
Validation Set: Project - Lien Waiver Compliance - Scheduled Monthly
Source References:
1. Vendor Ledger Entry (25) - Subcontractor payments
Link via: [Job:No] = [25:CustomJobNo]
Reference Filters:
[25:VendorNo] in (SELECT Vendor WHERE Vendor.Subcontractor = true)
2. Lien Waiver (Custom Table)
Link via: [25:CustomJobNo] = [LienWaiver:JobNo]Condition:
Action - Email:
To: project.manager@construction.com
CC: accounting@construction.com
Subject: Lien Waiver Compliance Alert - Job [Job:No]
Body:
LIEN WAIVER DEFICIENCY
Project: [Job:No] - [Job:Description]
Owner: [Job:CustomOwner]
Lien Waiver Status:
Total Subcontractor Payments: $[SUM(25:Amount)]
Lien Waivers Collected: $[SUM(LienWaiver:Amount)]
Deficiency: $[Difference]
Subcontractors with Missing/Insufficient Waivers:
[FOR EACH Subcontractor WHERE Payments > Waivers:
Subcontractor: [Vendor:Name]
Payments to Date: $[Amount]
Waivers Received: $[Waiver Amount]
Missing: $[Difference]
Last Payment Date: [Date]
]
Risk:
Unpaid subcontractors can file mechanics liens against project property even if general contractor paid them. Missing lien waivers leave owner and general contractor exposed.
Required Actions:
1. Contact each subcontractor for missing waivers
2. Do not make additional payments without waivers for prior periods
3. Verify waiver form validity (state-compliant)
4. Ensure waivers cover correct time periods
5. Obtain final unconditional waivers at project completion
Lien Rights Expiration:
State Filing Deadline: [State-specific deadline after completion]
Project Completion Date: [Job:CustomCompletionDate]
Lien Deadline: [Calculate deadline]
Days Until Lien Rights Expire: [Days remaining]
Part 5: Certified Payroll for Public Works
Davis-Bacon Compliance
Public works projects require certified payroll submissions documenting prevailing wage payment.
Validation Set: Payroll - Prevailing Wage Check - OnPost
Rule 1: Validate Wage Rates Against Determination
Source References:
1. Employee (5200)
Link via: [Payroll:EmployeeNo] = [5200:1]
2. Job (167)
Link via: [Payroll:JobNo] = [167:1]
3. Wage Determination (Custom Table)
Link via: [167:CustomWageDeterminationNo] = [WD:No]
AND [5200:CustomCraftClassification] = [WD:Classification]Condition:
[167:CustomPrevailingWageProject] is true
AND [Payroll:HourlyRate] < [WD:PrevailingWageRate]
Action - Message:
Type: Error
Message:
PREVAILING WAGE VIOLATION
Project: [167:No] - [167:Description]
Employee: [5200:FullName]
Classification: [5200:CustomCraftClassification]
Wage Determination: [WD:No]
Required Prevailing Wage: $[WD:PrevailingWageRate]/hour
Required Fringe Benefits: $[WD:FringeBenefitRate]/hour
Total Required: $[[WD:PrevailingWageRate] + [WD:FringeBenefitRate]]/hour
Employee Compensation:
Base Wage Rate: $[Payroll:HourlyRate]/hour
Fringe Benefits: $[Payroll:FringeBenefitAmount]/hour
Total: $[[Payroll:HourlyRate] + [Payroll:FringeBenefitAmount]]/hour
Deficiency: $[Deficiency amount]/hour
Hours Worked: [Payroll:Hours]
Total Underpayment: $[Deficiency × Hours]
Davis-Bacon Requirements:
- Pay prevailing wage OR
- Pay lower base wage + bonafide fringe benefits making up difference
Fringe benefits eligible to meet prevailing wage:
✓ Health insurance
✓ Pension contributions
✓ Vacation pay
✓ Apprenticeship training
✗ Payroll taxes (FICA, unemployment)
✗ Overtime premium (OT already required)
Correct wage rate before posting payroll.
Penalties:
- Contract termination
- Back wages owed to employee
- Liquidated damages
- 3-year debarment from federal contracts
Wage Determination details: [WD reference link]
Rule 2: Require Weekly Certified Payroll Submission
Validation Set: Project - Certified Payroll Submission - Scheduled Weekly
Source References:
1. Job (167)
Reference Filters:
[167:CustomPrevailingWageProject] is true
[167:Status] is 'In Progress'
2. Certified Payroll Submission (Custom Table)
Link via: [167:No] = [CPSubmission:JobNo]
Reference Filters:
[CPSubmission:WeekEnding] = [Last Friday]Condition:
COUNT(CPSubmission:*) is 0
AND [167:CustomConstructionStartDate] <= [Last Friday]
Action - Email:
To: payroll@construction.com, project.manager
CC: compliance.officer
Subject: OVERDUE - Certified Payroll Due for Job [167:No]
Body:
CERTIFIED PAYROLL PAST DUE
Project: [167:No] - [167:Description]
Week Ending: [Last Friday]
Due Date: [Last Friday + 7 days]
Days Overdue: [Today - Due Date]
Davis-Bacon Act requires weekly certified payroll submission within 7 days of week ending.
Required Form: WH-347
Payroll Must Include:
- Each employee name and last 4 digits of SSN
- Craft classification
- Hours worked each day
- Total hours for week
- Rate of pay
- Gross amount earned
- Deductions itemized
- Net wages paid
- Statement of Compliance (signed by employer)
Prime Contractor Responsibility:
- Submit own certified payroll
- Collect and submit subcontractor certified payrolls
- Verify subcontractor wage compliance
[LIST(Subcontractors on project)]
Consequences of Non-Compliance:
- Work stoppage
- Payment withholding
- Contract termination
- Debarment (3 years)
- Investigation by Wage and Hour Division
Submit certified payroll immediately.
Submission Portal: [Portal URL]
Questions: [Compliance officer contact]
Part 6: Equipment Cost Tracking
Equipment Utilization and Job Costing
Construction equipment costs must be accurately allocated to jobs.
Validation Set: Equipment Time Entry - Job Allocation - OnPost
Rule 1: Allocate Equipment Costs to Jobs
Source References:
1. Fixed Asset (5600) - Equipment
Link via: [TimeEntry:EquipmentNo] = [5600:1]
2. Job (167)
Link via: [TimeEntry:JobNo] = [167:1]
Condition:
Action - Message:
Rule 2: Monitor Equipment Utilization Rates
Validation Set: Equipment - Utilization Analysis - Scheduled Monthly
Source References:
1. Equipment Time Entry (Custom Table)
Link via: [FixedAsset:No] = [TimeEntry:EquipmentNo]
Reference Filters:
[TimeEntry:Date] >= [FirstDayOfMonth]
[TimeEntry:Date] <= [LastDayOfMonth]Condition:
SUM(TimeEntry:Hours) / [WorkingHoursInMonth]
Action - Email:
To: equipment.manager@construction.com
Subject: Low Equipment Utilization - [FixedAsset:Description]
Body:
EQUIPMENT UNDERUTILIZATION ALERT
Equipment: [FixedAsset:Description]
Equipment No.: [FixedAsset:1]
Month: [Current Month]
Utilization Analysis:
Total Hours Used: [SUM(TimeEntry:Hours)]
Working Hours Available: [WorkingHoursInMonth]
Utilization Rate: [Percentage]%
Cost Analysis:
Monthly Ownership Cost: $[Monthly depreciation, interest, insurance]
Hours Worked: [Hours]
Cost per Hour Worked: $[Ownership Cost / Hours]
Target Utilization: 75%
Current Utilization: [Percentage]%
Underutilized by: [75% - Current%]%
Financial Impact:
Fixed costs regardless of usage: $[Amount]
Revenue from hours worked: $[Billable hours × rate]
Net contribution: $[Revenue - Costs]
Options to Improve Utilization:
1. Transfer equipment to higher-demand job site
2. Rent out equipment during idle time
3. Consider selling if consistently underutilized
4. Review equipment fleet size vs. demand
Jobs Using Equipment This Month:
[FOR EACH Job:
Job: [No] - [Description]
Hours: [Hours on this job]
% of Total: [Percentage]
Summary and Key Takeaways
This guide covered construction and project-based industry validations:
Job budget controls with variance monitoring and commitment tracking
Change order management with approval workflows and budget revisions
Subcontractor compliance insurance verification and license tracking
Lien waiver management to protect against mechanics liens
Certified payroll Davis-Bacon prevailing wage compliance
Equipment cost tracking utilization monitoring and job allocation
Construction management benefits:
Real-time project profitability monitoring
Automated budget variance alerts
Change order impact analysis
Subcontractor risk mitigation
Lien protection through waiver tracking
Prevailing wage compliance assurance
Accurate equipment cost allocation
Early warning of budget overruns
Implementation considerations:
Integration with project management systems
Time and equipment tracking systems
Document management for lien waivers and certifications
Payroll system integration for certified payroll
Mobile access for field personnel
Customer portal for change order approvals
Related topics:
Blog 030: Understanding Scenarios (project lifecycle timing)
Blog 031: Advanced Table Linking (multi-level job costing relationships)
Blog 042: Government Solutions (prevailing wage and public works compliance)
Blog 033: Performance Optimization (handling large project transaction volumes)
This blog is part of the QUALIA Rule Engine series for Microsoft Dynamics 365 Business Central. Follow along as we explore business rule automation patterns.
