Construction Terms Demystified: 50+ Essential Terms for Newcomers & Industry Stakeholders
By John Yeung, Vice President, Beacon Consulting Group, Inc.
Whether you’re new to the construction industry, a professional from a related field (surety claims, insurance, law, or finance), or an owner looking to better understand your project, this glossary breaks down over 50 of the most commonly used — and sometimes misunderstood — construction terms. From contracts to job-site lingo, this is your go-to cheat sheet.
1. As-Built Drawings - Drawings that reflect the actual, completed construction, incorporating all field changes.
2. RFI (Request for Information) - A formal query used to resolve uncertainties in project documents during construction.
3. Change Order - A legal document altering the scope, time, or cost of the original contract.
4. Substantial Completion - The point at which the project can be used for its intended purpose, despite minor work remaining.
5. Punch List - A checklist of incomplete or unsatisfactory items created before project closeout.
6. Retainage - A portion of the contract sum withheld until final project completion to ensure quality.
7. Surety Bond - A financial guarantee from a third party (the surety) ensuring contract completion.
8. Performance Bond - Protects the project owner if the contractor fails to complete the project as agreed.
9. Payment Bond - Ensures that subcontractors and suppliers are paid by the contractor.
10. Bid Bond - Assures the owner that a contractor will accept the job if awarded.
11. General Conditions - Baseline rules outlining rights, responsibilities, and relationships in a contract.
12. Supplementary Conditions - Adjustments to general conditions tailored to a specific project.
13. Schedule of Values (SOV) - A breakdown of the project cost, used for billing and progress tracking.
14. Draw Request - A contractor’s request for payment based on completed portions of work.
15. Critical Path Method (CPM) - Scheduling method showing the longest sequence of tasks to determine project duration.
16. Mechanic’s Lien - Legal claim against property to secure payment for labor or materials.
17. Certificate of Occupancy (CO) - A government-issued document certifying a building’s compliance and readiness for use.
18. Design-Build - A delivery method where one entity handles both design and construction.
19. Design-Bid-Build - A traditional delivery approach separating design and construction contracts.
20. Value Engineering (VE) - Cost-saving strategy that maintains or improves function and performance.
21. Scope of Work (SOW) - Detailed outline of work to be performed, including materials, methods, and timelines.
22. Addendum - Revisions or clarifications issued during the bidding phase of a project.
23. Backcharge - Cost assessed to a subcontractor for corrective work or damages.
24. Mobilization - Initial phase when materials and personnel are prepared and moved to the site.
25. Demobilization - Project shutdown phase where materials and equipment are removed from the site.
26. Liquidated Damages - Pre-agreed daily fee charged to a contractor for late project completion.
27. Force Majeure - Clause excusing delays due to uncontrollable events (e.g., natural disasters).
28. Change Directive - An order to proceed with a change before final agreement on scope or price.
29. Notice to Proceed (NTP) - The formal go-ahead to begin work as per contract terms.
30. Commissioning - Testing and verification of systems (HVAC, lighting, etc.) to ensure functionality.
31. Shop Drawings - Detailed diagrams submitted by contractors showing fabrication and installation methods.
32. Submittals - Samples, data, and documents submitted for approval before procurement or installation.
33. Change Management - Process for handling scope, cost, or schedule changes during construction.
34. Hard Costs - Tangible construction costs like materials, labor, and equipment.
35. Soft Costs - Indirect costs such as legal, architectural, and financing fees.
36. Takeoff (Quantity Takeoff) - Estimating method for calculating required materials and labor.
37. RFQ (Request for Qualifications) - A solicitation asking firms to demonstrate experience and capacity.
38. RFP (Request for Proposal) - Request seeking detailed technical and pricing proposals from vendors.
39. GC (General Contractor) - A party responsible for the daily management of a construction site, coordinating vendors and tradespeople, and ensuring effective communication among all parties involved throughout the duration of the building project.
40. Subcontractor - A party contracted to perform a specific portion of work on the project.
41. Certificate of Substantial Completion - A document marking project usability while minor items remain unfinished.
42. Building Code - Regulations governing building design, safety, accessibility, and structural integrity.
43. Lean Construction - A methodology focused on reducing waste and increasing efficiency in building processes.
44. Integrated Project Delivery (IPD) - A collaborative delivery model where owner, designer, and contractor share risks and rewards.
45. Prevailing Wage - Minimum wage that must be paid on public works projects, determined by locality.
46. Entitlement - Legal right to build on a property, often involving zoning and permit approvals.
47. Clerk of the Works - An on-site representative of the owner who monitors work for quality and adherence.
48. T&M (Time and Materials) - A contract type where the owner pays based on actual time worked and materials used.
49. Lag Time - Delay between the finish of one activity and the start of the next in scheduling.
50. Float (or Slack) - Amount of time a task can be delayed without affecting project completion.
51. Fast-Tracking - Starting construction before the design phase is fully complete to save time.
52. Default - In relation to surety bonds, default refers to the principal's failure to fulfill their obligations as outlined in the contract or bond, triggering the surety's obligation to cover potential losses or damages. The principal could be a general contractor or subcontractor who has agreed to perform a specific task or obligation. A default occurs when they fail to do so as outlined in the contract or bond.
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