Create Project

Objective

• To capture the process of creating a new construction project

Introduction

• The first stage in construction project management module is to create the project in Cittaerp.
• There are generally two types of construction projects a company can embark upon
  1. Customer Contract Project
     • Property Development for Customers
     • This relates to a construction project contract awarded by a customer to the company
     • There is usually a construction contract to be executed by the company and the customer. This executed contract forms the basis of the project operation and execution .
     • The construction contracts will normally contains the pricing , billings, payment terms, timing, performance obligation, and other relevant clauses affecting the operation and execution of the project for the customer.
     • The customer contract project accounting treatment and disclosure requirements are guided by international financial reporting standards (IFRS 15)
  2. Internal Project
     • This relates to a construction project initiated internally by the company for its own purpose .
     • Internal project is not related to any external customer
     • The internal projects of a company can be classified into three categories.
       1. Property Development for Company Use
          • For example, construction of fixed assets for company use like training school building. admin building, staff clinic building, staff quarters, office wall and fence etc
       2. Property Development for Sales
          • For example, internal construction of housing units for later sales to customers at completion or near completion.
       3. Property Development-Rental & Capital Appreciation
          • For example, internal construction of office building complex by the company for the twin purposes of renting to tenants at completion as well as capital appreciation.
     • Each of the above three category has a unique accounting treatment and disclosure requirements in line with standards.

Process

1. Go to Construction Project>>Settings>>Project
2. Click the (+) sign for a new project and the project maintenance screen opens as below
3. The project maintenance screen has six tabs with relevant fields for completion as follow
   1. Project Information Tab
   2. Customer Information Tab
   3. Customer Contract Accounts Tab
   4. Document Management Tab
   5. Dimension Tab
   6. Updated Project Balances Tab

Project Header

1. Name
   • Enter a unique name for the project
2. Project Type
   • Select if project is a Customer Contract or Internal Project
   • Default is Customer Contract

Project Information Tab

1. Project Group Account
   • This is a mandatory selection
   • Select the any project group from the following options
     • Property Development for Sales
     • Property Development for Company Use
     • Property Development-Rental & Capital Appreciation
     • Property Development for Customers
   • Click the extract button
   • System auto-populate all relevant general ledger accounts for the selected project group
2. Work Description
   • Enter summarized description of the project
3. Address
   • Enter the site address of the project
4. Est Project start Date
   • This relates to the estimated or actual start time of the project
5. Est Project End Date
   • This relates to the estimated completion date of the project
6. Project Estimated Cost
   • This is the estimated or budget cost of completing the project
   • This is a mandatory field
7. Project Manager
   • Select the employee who is the project manager

Customer Information Tab

1. This is only enabled when customer contract is selected at the header and not for internal projects.
2. Customer
   • Select the project customer
   • This is mandatory field
3. Contract Pricing Type
   • Any of the following two customer contract transaction pricing options are available for selection
     1. Fixed Lump Sum
        • Where the contract is priced at a specific fixed lump sum amount for the project
        • Once the fixed lump sum button is selected, the following field is enabled
          • Contract Price
            • Enter the gross contract sum before taxes
     2. Cost Plus Contract Pricing
        1. Where the contract is based on estimated project cost plus a fee amount
        2. The company is to be reimbursed by the customer for actual cost incurred plus a fee or a percentage of cost to cover for the profit
        3. This is the default
        4. Once cost plus contract pricing button is selected, the following fields are enabled
           1. Fee Amount or Percentage
              1. This is margin or fee amount as per the contract
           2. Contract Price
              1. This is a calculated display field of addition of estimated project cost plus fee amount
   • In any case, variations in the contract price can be processed in the system as may be required to modify or change the original contract price
4. Contract WHT
   • Withholding tax percentage on the contract
5. Contract VAT
   • Value added tax percentage on the contract
6. Revenue Recognition
   • There are two revenue and profit recognition options for customer contract projects in line with the IFRS-15
     1. Percentage of completion
        • This is relevant where the company satisfy its performance obligation on the construction contract over time.
        • The contract clause gives the company enforceable rights to payment for performance completed to date even though the project is yet to be 100% completed.
        • Revenue and profit is recognized over time based on percentage of completion to date
     2. Transfer Control
        • This is relevant where the company satisfy its performance obligation on the construction contract at a point in time.
        • The contract clause does not give the company enforceable rights to payment for performance completed to date but enforceable only
          • If the project is 100% completed or
          • When control of the project output asset is transferred to the customer.
            • Control of an asset is defined as the ability of the customer to direct the use of and obtain substantially all of the remaining benefits from the asset.
            • This means that the project is near completion but customer has taken control and now substantially utilizing the project output asset for its purpose.
        • Revenue and profit is recognized when control is transferred in which case 100% completion is assumed at transfer control point.
7. Contract Progress Method
   1. This relates to acceptable methods for measuring progress toward the completion of a contract and therefore, determining when to recognize revenue
   2. The method chosen must be appropriate for the circumstances of the contract.
   3. The method chosen must depict the company’s performance toward satisfactory completion of the project.
   4. Any of the the following two acceptable options need to be selected .
      1. Input Method
         1. This measures the efforts or materials expended to satisfy the obligation.
         2. Progress at any point in time is measured as actual project costs incurred to date divided by the estimated project cost to completion.
         3. The completion percentage is system generated as all the required variables for computing project percentage of completion are already in the system.
         4. This is the default
      2. Output Method
         1. This measures the physical output achieved
         2. A physical survey of work done to date is made by the relevant professional and a percentage of completion to date is arrived based on the physical survey.
         3. Progress at any point is based on the physical output survey to determine percentage of completion.
         4. This means that the percentage of completion to date is manually inserted to the system after every physical survey
8. Upfront Payment Required
   1. This relates to the payment term clause in the contract that confirms if an advance payment required as a form of mobilization to be be paid by the customer before the company can commence work on the customer contract project.
   2. Default is No
9. Progress Payment
   1. This relates to the payment term clause in the contract that confirms if the customer is expected to make progress payment on the contract.
   2. Default is No.
10. Payment Term
    1. This relates to payment term on each progress billing to the customer
    2. This is mandatory field

Customer Contract Accounts Tab

1. The customer contract accounts relate to relevant general ledger account for auto-processing construction customer contract accounting entries by Cittaerp .
2. These listed accounts fields in the tab are instantly auto-populated once the project group extract button is activated at the project information tab.
3. No further action is required

Dimension Tab

• This is relevant where the company will like to attach a dimension or additional analysis to the project.
• This is not a mandatory tab for completion

Updated Project Balances

• This tab is not relevant for creation of a new project.
• It only displays critical project balances on real time basis when the project is in progress

Submit for Processing

• This submission follows the defined workflow approval route
• At final approval,
  • The project is registered with an auto project ID.