# How to Calculate Cost of Work Certified in Contract Costing

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Calculating the cost of work certified in contract costing can be a daunting task, especially if you are not familiar with the process. However, with the right tools and knowledge, you can effectively calculate the cost of work certified accurately. In this article, we will take a closer look at how to calculate the cost of work certified in contract costing.

What is work certified, and why is it important?

Work certified refers to the work that has been completed on a construction project and has been approved by the project manager or engineer. It is an essential part of contract costing because it determines how much the contractor should be paid for their work. Work certified is typically measured in progress payments, which means that the contractor can submit invoices for a portion of the work completed.

Calculating the cost of work certified

To calculate the cost of work certified, you will need to follow these steps:

Step 1: Determine the value of work certified

The first step is to determine the value of work certified. This is done by calculating the progress made on the project from the start of the contract. The progress is typically expressed as a percentage of the total project value.

For example, if the total project value is \$1 million, and the progress made so far is 50%, the value of work certified would be \$500,000.

Step 2: Apply the contract rate

The next step is to apply the contract rate to the value of work certified. The contract rate is the agreed-upon rate between the contractor and the project owner.

For example, if the contract rate is 10%, the cost of work certified would be \$50,000.

Step 3: Account for any adjustments

Finally, you need to account for any adjustments, such as retention, advance payments, or variations. Retention is the amount of money that is held back by the project owner to ensure the contractor completes all work to a satisfactory standard. Advance payments are payments made by the owner before the work is completed, and variations are changes to the original contract.

For example, if there is a 5% retention and a 2% variation, the cost of work certified would be reduced to \$45,000 (\$50,000 – 5% retention – 2% variation).

Conclusion

Calculating the cost of work certified in contract costing is an essential component of construction projects. It determines how much the contractor should be paid and is based on the progress made on the project, the contract rate, and any adjustments made. By following these steps, you can accurately calculate the cost of work certified and ensure a successful project outcome.