B2W Flipbooks

Page | 17 CONSTRUCTION MANAGEMENT Owner is constructing a $20 Million building and hires Contractor to oversee the project. The project is expected to take 12 months to complete. Under the terms of the agreement, Owner will pay Contractor $1.2 Million in $100,000 monthly installments for services provided. Contractor will provide all administrative services for Owner including bid process, scheduling and monitoring, pay application approval, and inspections. There are four performance obligations noted in the agreement. However, Contractor determines that promise to the Owner is to provide construction management for the project. The performance obligations are inputs into the overall deliverable and are highly interrelated. Therefore, the performance obligations should be bundled into a single performance obligation. JOB ORDER CONTRACTS Contractor has been awarded a master service contract from Pima County Procurement to provide patching and repair services to county roads. The contract length is January 1, 2017 to December 31, 2017 for a not to exceed total of $1.5 Million including set hour and material rates. The County will provide Contractor separate purchase orders (POs) for each patch or repair to be performed. Here the Contractor has entered into a contract with set rates, maximum total amount, and a defi ned length of time. The piece missing is the performance obligation. When a PO is issued, the performance obligation has now been identifi ed. Each PO is to be treated as a separate performance obligation. A HVAC contractor enters into a contract to design, fabricate and install a new HVAC system at a new hospital. The HVAC contractor is responsible for designing the system, purchasing the material, and installing the system. As all of these services are interdependent and interrelated (the customer cannot benefi t from each good on its own), the contract would be considered one performance obligation. In this example, the owner of the project is benefi ting from a completed and installed HVAC system. If the contract requires the HVAC contractor to provide maintenance/service for the system over the next fi ve years this would need to be evaluated separately from the promises to design, fabricate and install the new HVAC system. In this case, the maintenance/service of the system would be distinct from the initial system completion and accordingly, this would be treated as a separate performance obligation. EXAMPLE: SPECIALTY CONTRACTOR Assessing Multiple Performance Obligations (continued) > EXAMPLES: CONSTRUCTION MANAGEMENT AND JOB ORDER CONTRACTS

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