All you need to know about pro rata accounts

Allocating shared work costs can quickly become a headache. It has a significant impact on the efficiency and profitability of a project. This article provides you with tips for better managing pro rata accounts, and thus promoting financial transparency and collaboration between all stakeholders on a construction site.

The pro rata construction account

The pro rata construction account ensures equitable financial management of overheads on major projects. Its operation facilitates the distribution of costs between all the companies involved.

Definition of pro rata account

The pro rata construction account is a financial mechanism used mainly on major projects involving several actors. This device makes it possible toallocate overheads fairly generated by the various companies involved in the project.

These costs, which are essential for effective site management, include items such as shared insurance or temporary management facilities. They are not assigned to a specific company but are supported collectively by all participants.

Challenges and objectives of the pro rata account

The creation of a pro rata account on a construction project aims to several goals :

• Involve all participants in the management of shared costs and the maintenance of equipment,
• Avoid that common expenses are based solely on the main contractor,
• Achieve economies of scale through the sharing of costs,
• Improve interactions between companies operating on large-scale projects.

Expenses included, or excluded, from the pro rata account

The fees included in the pro rata account include: equipment, installation and consumption necessary for the smooth running of the site, and in particular:

• Surveillance,
• Security fences,
• The sanitary facilities,
• The cloakroom area,
• Water supply,
• The supply of electricity,
• The maintenance of the areas and the equipment used in common, among others.

However, some expenses are not taken into account. Here are a few examples:

• The purchase of materials for the work intended for the project owner,
• Post-work cleaning,
• The evacuation of waste,
• Losses related to theft or damage that do not affect collective property.

Cost sharing arrangements are in principle specified in the CCAP (Special Administrative Clauses Book) or the CCAG (Book of General Administrative Clauses). Basic sharing on various criteria such as the amount of turnover, or the time spent on the site.

The benefits of using a pro rata account

The pro-rata account has several benefits:

• An equitable distribution of burdens: the mechanism guarantees a fair division of expenses related to infrastructure and shared services, among all companies concerned.
• Optimizing overhead management: the system alleviates the administrative burden of shared costs. It allows businesses to focus fully on their core activities.

Prorata account management

Good account management is important for the transparency of the construction site.

Who is responsible for the pro rata account?

The responsibility for managing the pro rata account is assigned to a manager, and sometimes to an oversight committee acting in concert. The manager role is usually given to one of the companies on site, with the main company or another company playing an important role in the project.

What are its responsibilities?

The manager's obligations are as follows:

• The collection of financial participations from companies,
• The payment of shared expenses,
• Keeping the accounts.

The manager also plays an important role in the communication of information relating to the expenses and contributions of each company.

A control committee can therefore be set up.. It usually consists of representatives from all companies involved. Its mission is to ensure the smooth running and verification of the management of the pro rata account.

Steps for managing the pro rata account for the construction site

Prorata account management involves following specific steps.

Predictive evaluation of expenses

At the start of the construction site, a provisional budget is calculated under the coordination of the pro rata account manager. It includes all expenses of common interest planned for the duration of the project.

Calculation of participations

The percentage of participation of each body of state is determined beforehand. It applies on the amount of the contract of each company to calculate their financial contribution.

Expense tracking and recording

The expenses incurred are followed meticulously by the manager. They must be justified by invoices.

Bookkeeping and invoicing

The manager is responsible for maintaining the accounts, and for the issuance of invoices or calls for funds to cover expenses.

Periodic statement of expenditure and revenue

The manager periodically provides a detailed statement of expenses and revenues to the companies involved.

Adjustments and final balance

At the end of the work, after the Acceptance of work, The pro rata account is settled. The final cost breakdown is based on actual expenses. The manager then issues final invoices or credit notes to adjust the contributions of each company.

The proper management of the pro rata account is therefore essential to ensure transparency and fairness on a construction site. Manage it well and it will become a tool for fruitful collaboration between all stakeholders.