Infrastructure construction & real estate development business is one of the most challenging businesses involving huge coordination & documentation with subcontractors for core and non-core activities commissioned to them. A major portion of total project cost is subcontracting for such projects which may go up to 75% of total project cost in some cases. Based on size and nature of the project, number of subcontractor can vary from 2-3 to even 25-30 or more in some cases. So it is very important to manage the subcontracting process and related cost very efficiently in a structured manner.
As a part of contract with subcontractor, companies are required to negotiate and incorporate BOQ, multiple work order terms and conditions such as Retentions, Escalation Parameters, Recoveries, Advances, Statutory requirements etc. with subcontractors and monitor their work and make progress payments. During Project execution, and due to its operational challenges, it is difficult for companies to track measurement, materials issued to subcontractors, advances, escalation percentages, recoveries and deductions and arrive at the RA bill payable to sub-contractor. In the absence of structured software based system, it requires big amount of human efforts to manage the entire process and control wastage through proper material reconciliation accurately. This has led to construction companies looking seriously to standardise & automate entire subcontracting process to provide faster and more accurate results through a proper software system.
Working with similar companies, keeping all challenges in mind and delivering industry specific solutions for more than a decade, Highbar Technocrat Limited (HBT) has come out with strategic solution for subcontractor process management, which is built on SAP Platform & integrated with other core processes.
Solution Overview
The solution ensure that key business processes are integrated seamlessly thus reducing the business risks by increasing the accuracy and reliability of business data and boosting productivity and revenue by automating routing beside bringing in following major benefits.
- Process Improvement – system driven processes
- Transparency into processes execution as data managed and reconciled in the system
- System based RA bill generation
- Electronic approval system
- Audit trail and online repository
- System based material reconciliation
- Wastage control
Process flow
Key Features
- Client BOQ upload
- Detailed Work Order creation with applicable terms & conditions
- Retention %, escalation parameters, Advance recovery, materials to be issued & its recovery
- Statutory details like Withholding Tax, Labour Cess, etc.,
- RFI Creation and Print based on BOQ executed
- RFI Confirmation/Approval
- DPR/Actual Progress Quantity Confirmation
- Subcon Work done quantity confirmation in RA Bill based on approved Progress
- System driven calculations for escalation, advance recovery & material recovery
- Options to input any other recoveries
- Subcon Payment abstract processing,
- Data flows from above subprocess
- Option to maintain some items manually (e.g. Other recoveries, penalties, with-held etc.,)
- Posting of vendor liability (Service entry) based on multiple level approvals
- Posting of invoice verification & recoveries based on multiple level of approval
- Subcontractor RA Bill Abstract Print
- Automatic Postings of expenses, recoveries, taxation etc., to respective GL’s in Finance
- Payment Certificates
- Strategic tool which aligns multiple business activities with business objectives
- Supports ECC, S/4 HANA Applications
- On-premise/Cloud deployment
- Quick & Easy Deployment
- Flexible, scalable
Key Benefits
- Reduced Subcontractor Management Cycle Time
- Material Reconciliation based on work done
- Automatic recovery of advances given to subcontractor
- Auto reconciliation & recovery of materials issued subcontractor
- Inbuilt escalation calculation (quantity based)
- Efforts reduction in Finance due to auto GR/IR
- Inventory Cost Control: Real time Material reconciliation is done based on considering work done and physical stock lying at subcontractor
- Single window for subcontractor billing monitoring
- Certified Progress based cash outflow
- Reduce business risk by increasing the accuracy and reliability of business data
Article contributed by Mr. Joydeep Banerjee, Business Development Head, Highbar Technocrat Ltd.
