Are your construction purchase orders correct?
Have you ordered a product only to find it hasn’t arrived when expected, it wasn’t exactly what you thought you had ordered, or there were additional extra costs that you had to pay?
In construction, the same often happens. Materials arrive late, are delivered to the wrong address, come in the wrong quantity or are of the wrong specifications. The contractor often suffers delays and additional costs.
How can we avoid these problems?
Construction projects require materials and equipment which the contractor purchases from suppliers. Smaller items may be purchased from local shops, or suppliers, and are usually paid for at the time or are put on the account. Major items, or items in large quantities, are ordered with purchase orders which are basically a promissory note to pay for a particular item when it’s delivered, or within a period of time after its delivery.
Sometimes a deposit is paid for the item before it’s delivered. What’s written on these purchase orders should specify exactly what you want, when you want it and how much it will cost. Get it wrong and you may receive the wrong item or the right item at the wrong time, or you may end up paying more than you bargained for!
Ensuring the construction purchase orders is correct
Unfortunately, some construction purchase orders are poorly written which results in the supplier delivering the wrong item, or delivering the items to the wrong address or at the wrong time. Sometimes the price isn’t clear or what’s included in the quoted price isn’t included on the order. This can lead to misunderstandings, additional costs and even delays to your project.
If you issue an order to the supplier it should:
- Be clear and unambiguous.
- Have the project name.
- Have the date of the order.
- Include an order number.
- Have the suppliers’ names and contact details.
- Include a complete description of the product.
- Reference any standards, specifications, and drawings the product must comply with.
- Have any specific manufacturing instructions and details.
- Specify the delivery date.
- Include the arrangements to transport the item (if the supplier is providing the transport include the full delivery address, instructions and possibly even a map).
- If the supplier is providing transport and there are specific project site restrictions such as delivery hours, vehicle paperwork and security clearances these need to be included on the order.
- Have the product price, specifying the unit of measurement and what is included in the price.
- Specify the terms of payment, as well as any trade discounts.
- Include the address where the supplier should submit their invoice.
- Specify the warranties and spare parts required.
- Include the name and contact details of the person issuing the order.
- Be signed by an authorized person (this may depend on the value of the order, since often people are only allowed to sign orders up to a particular value, and may have to ask more senior management to sign orders with greater value).
- Be acknowledged by the supplier so there is a record that the supplier has received and has accepted the order.
- When test inspections and quality control documentation is required these requirements should be included on the order.
- If pre-inspections are required by you or your customer, specify the notification procedures and inspection arrangements.
If the supplier has issued the order to you, it must be carefully verified before it is acknowledged, agreed or signed, to ensure that it complies with the points listed above. And most important read all of the small print – you may be surprised what some suppliers include in their list of conditions and you don’t want to be caught out, because it will surely cost you.
Copies of the orders should be kept on file at the project, and be referred to so the project can track the fabrication process, ensuring the material is delivered on schedule. When paying invoices it is important to check that the invoice agrees with the order. Often projects are invoiced additional costs for work that was originally included in the terms of the order.
Next time you issue an order or receive one, take the time to carefully read it to ensure that it is clear and that the supplier will have no excuse for delivering the wrong item or claim for additional costs. A few extra minutes writing out purchase orders correctly can save you a whole lot of sweat later.