Construction Business Terms and Organizations

The construction industry is full of unique and specific terms, acronyms, and organizations. Below is a list of these terms that you may come across on the job site, in the office, and around the industry.


Accounts Payable (AP)
Money you owe to a vendor and subcontractors for business costs and expenses. These include all types of costs; overhead, direct, and indirect. Effective management of these records will ensure that everyone gets paid on time.

Accounts Receivable (AR)
Money that is owed to your business for a completed project or performed service. It is cash “to be received.” Having strong accounts receivable management will ensure that your business maintains a healthy cash flow.

Associated Builders and Contractors is a U.S. trade association representing the non-union construction industry. ABC is comprised of 69 chapters with a total membership of more than 22,000 commercial contractors and construction-related firms.

The American Concrete Institute is a non-profit technical society that develops and disseminates consensus-based knowledge on concrete and its uses.

The Associated General Contractors of America represents more than 27,000 firms, including over 6,500 of America’s leading general contractors, and over 9,000 specialty-contracting firms.

AIA billing is a system, created by the American Institute of Architects in 1992, that serves as a standardized way for contractors to submit work-related paperwork to architects most commonly used for pay applications.

American Subcontractors Association promotes the rights and interests of subcontractors, specialty contractors and suppliers.

As-Built Drawing
Revised set of drawings submitted by a contractor upon completion of a project or a particular job. As-built drawings reflect all changes made in the specifications and working drawings during the construction process.


Revenue a contractor still expects to earn on a construction contract before completing the project. Being able to analyze the backlog can assist in making decisions on taking on more work, what your workforce needs will be, and adjusting to economic circumstances.

Balance Sheet
The financial statement of a company which includes assets, liabilities, equity, capital, total debt, etc. at a point in time. The balance sheet includes assets on one side and liabilities on the other.

Process of submitting a proposal (tender) to undertake, or manage the undertaking of a construction project. The process starts with a cost estimate from blueprints and materials take-offs.

Bid-Hit Ratio
The winning ratio at which you successful bid or propose on a construction project. From example. a 3-to-1 bid-hit ratio indicates that for every three jobs you bid, you are awarded one.

Bill of Quantities 
A document in which materials, parts, and labor with the costs are itemized. Quantities can be measured in number, area, volume, weight or time. Preparing a bill of quantities requires that the design is complete and a specification has been prepared.

Building Information Modeling (BIM)
A computer model of a building that includes the entire structure, from its basic layout to the smallest details.


Computer-Aided Design (CAD)
Is it technology for design and technical documentation, which replaces manual drafting with an automated process.

Cost-Plus Contract
When the contractor is paid for all of a project’s expenses plus an additional fee for the job that is intended to be that contractor’s profit. Costs covered can involve direct costs, indirect costs, and agreed-upon profit.

A Contractor Controlled Insurance Program is a specific insurance policy purchased by general contractors to coordinate general liability for construction projects.

The Construction Financial Management Association is dedicated to serving the needs of construction financial managers and their service providers through the power of education, networking, and information.

The final phase of a construction project. It involves a completed punch list, overall completion of project work, administrative paperwork, and rounding out payments.

Cost Code
A group of individual costs based on their nature or function. The number is associated with an account title. These codes are used to track budgets and expenses from activity.

Change Order (CO)
A written document that modifies or changes a project’s plans, price, or specifications in a construction contract. The amendment changes the contractor’s scope of work.


Daily Report
A report that documents materials installed, crew information, safety incidents, and work completed as the document is created by the foreman at the end of each day.

The department of transportation, an executive department in the U.S. federal government. The department’s mission is “to develop and coordinate policies that will provide an efficient and economical national transportation system, with due regard for need, the environment, and the national defense.

Construction drawings that are a graphic and written record of what is to be built. Having a central location to update, manage, and access drawings for project stakeholders will improve project delivery.

A project delivery method in which the agency or owner contracts with separate entities for the design and construction of a project.

It is a method to deliver a project in which the design and construction services are contracted by a single entity known as the design-builder or design-build contractor. Design-build relies on a single point of responsibility contract and is used to minimize risks for the project owner and to reduce the delivery schedule by overlapping the design phase and construction phase of a project.


In construction, estimating is the process of forecasting the costs of building structure. This helps the company know the quantity of work, labor, materials and funds that will be required for a project to help prepared beforehand.

Enterprise Resource Planning (ERP)
A large software package or suite of applications used to run the main business processes such as accounting, human resources, customer management, project management and estimating.


Financial Statements
A collection of summary-level reports about a construction company’s financial results, position and cash flow. They include the income statement, balance sheet, and statement of cash flows.


Guaranteed Maximum Price (GMP)
This contract establishes a cap on the contractor price where the owner won’t compensate the contractor beyond that price. This contract is common when there are very few uncertainties headed into a project.

General Ledger (GL)
Refers to the primary record of a construction company’s transactions. Transactions from accounts payable, accounts receivable, and payroll affect the GL as they are entered into the accounting system.

General Contractor
The company manages all aspects of the day-to-day activities at the job site. They are in charge of actually building the building. General Contractors have their own employees who typically fill the role of project manager and Construction Superintendent.

General Conditions
Set the framework of the contract that establishes all the rights and obligations of the parties involved. Defines all general terms and items such as utilities, vehicles, organizational structure, mobilization, and demobilization.


Invitation for Bid (IFB)
This is a request given to contractors for them to submit a project proposal regarding their provided services and products.


Job Costing
Accounting method used to track construction work that is completed and measures whether the amount of activity aligns with the project budget


Lump-Sum Contract
A contract where a single price is quoted for the entire construction project. Also known as fixed-price contracts.

Liquidated Damages
The amount of money agreed upon by the parties at the time of the contract signing that establishes the damages that can be recovered in the event a party breaches the contract.

A lien is a contractor’s legal right to own a portion of a piece of property when they have added value to that property and have not received payment for that added value.

Leadership in Energy and Environmental Design is a green building certification program used worldwide. It is a set of rating systems for design, construction operation and maintenance of buildings that aims to help building owners and operators be environmentally responsible and use resources efficiently.


The Mechanical Contractors Association of America (MCAA) serves the unique needs of approximately 2,600 firms involved in heating, air conditioning, refrigeration, plumbing, piping, and mechanical service.


The National Electrical Contractors Association supports the businesses that bring power, light, and communication technology to buildings and communities. Through advocacy, education, research, and standards development, NECA works to advance the electrical contracting industry.


Occupational Safety and Health Administration (OHSA)
The largest regulatory agency of the United States Department of Labor, OHSA was created to ensure safe and healthful working conditions for workers by setting and enforcing standards and by providing training, outreach, education and assistance.

An owner-controlled insurance program is a single insurance plan designed to cover nearly all liability arising from a construction project.

When the billed amount to a client or owner surpasses the actual work or revenue earned on a project. In general terms, it’s better to be overbilled versus underbilled because it suggests that billings are outpacing costs, improving cash flow


Punch List
A list of items that must be completed before a construction project is declared complete to fulfill the customer’s specifications. After the punch list is closed out, the contractor can receive final payment.

Project Schedule
An outline of the steps that should be completed by a specific date before the next step can be taken. A successful schedule ensures that the project’s steps are complete in a timely manner that minimizes delays.

Project Manager
Handles the entire management of a construction project. From deliverables to schedules to budgets.

Prevailing Wage
Prevailing wage laws require that wages for construction workers on public works projects be calculated to reflect local wages for similar jobs. It acts as a sort of minimum wage for construction workers and prevents the use of cheap, non-local labor to undercut local workers.

Preliminaries (or Prelims)
This provides a description of a project that allows the contractor to access costs. Often an extensive list that includes costs for items within every aspect of a project. Some common items include management and admin costs, planning and design costs, site-base services, and mockups, testing, and sampling costs.

Performance Gap
An instance where the expected work progress does not match the results that are given. Closing performance gaps will increase employee’s efficiency that ensures projects delivery is optimized.


Request for Proposal (RFP)
A document a company requests from vendors to get an overview of offerings and costs for a specific service.

Request for Information (RFI)
A preliminary document to get general information from potential vendors. Contractors can be seeking to clarify information gaps in plans, drawings, specifications, and agreements.

Request for Change (RFC)
A formal proposal for the implementation of a change. Often arises when the client wants an addition or alteration to the agreed-upon deliverables for a project.

Also referred to as “retainage,” an amount of money withheld from payment to a contractor or subcontractor until the end of the construction project, or a time specified in the contract.

Revenue Recognition
The process of formally recognizing revenue on a project as it is earned over time. Revenue is typically recognized in construction using methods like the Percentage of Completion (PoC) method or the Completed Contract method. Understanding revenue recognition is vital for financial transparency 


Runs the day-to-day operations of the construction site, including controlling the short-term schedule and coordinating subcontractors/monitoring their quality of work and safety.

A written document from the contractor to the design team requesting approvals on equipment, materials, or completed works. These can in the form of shop drawings, cut sheets, or material data.

An agreement with the contractor and subcontractor that outlines the specific work services for a project.

The Sheet Metal and Air Conditioning Contractors’ National Association is an international trade association focused on promoting quality and excellence in the sheet metal and air conditioning industry.

Scope of Work
An agreement outlining in detail the work that will be performed on the project.

Scope Creep
When a project’s scope changes, the project work starts to extend, or “creep” beyond what was originally agreed, typically due to unforeseen changes.

Schedule of Values
A list of work items on a project which corresponds with their value and represents the entire amount of a construction project. The schedule of values is utilized by contractors to help with processing pay applications.


Used to document the sending of documents, files, or samples. It provides proof of who it was sent to, what was included, and when it was sent for the purpose of improving the distribution of important documents.

Time and Materials (T&M)
A written agreement between the owner and the contractor wherein payment is based on the contractor’s actual cost for labor, equipment, materials, and services plus a fixed add-on amount to cover the contractor’s overhead and profit. These contracts work best when the scope of work is not well defined.

The estimation of quantities for a contract needed to complete a job, from plans and drawings which are then recorded in the bill of quantities.


When a contractor has billed the client or owner less than the actual amount of work or revenue earned on a project. Underbillings can negatively impact a contractor’s cash flow and create a strain on project finances 


Work Schedule
A construction work schedule is a planning document that details how the team should complete a project. It covers critical information about required resources, the relationship between tasks and deadlines for the deliverables.

WIP Report
Work-in-Progress or Work-in-Process is a report designed to track the progress of active jobs and highlight essential financial metrics into projects performance