Glossary

Glossary of project, proposal and billing terms

The words that come up in pursuits, billing and firm finances, defined plainly.

Backlog

Also called Contracted backlog, Work on hand

The value of signed contract work a firm has not yet performed, measured as total contracted fees minus fees already earned. It shows how many months of revenue are secured before new wins.

Total contracted fees − fees earned to date

Dividing backlog by average monthly net service revenue gives months of backlog. A firm with $1.8M in backlog earning $300K a month holds six months of work.

Billable hours

Also called Chargeable hours, Direct hours

Hours an employee records against a client project, as opposed to overhead time such as marketing, administration, training or leave. They drive utilization, direct labor cost and, on hourly contracts, the invoice itself.

Breakeven multiplier

The multiplier on direct labor at which a firm covers its direct labor and overhead but earns no profit. Any effective multiplier above it contributes to profit; any below it loses money.

1 + overhead rate

With an overhead rate of 160 percent, the breakeven multiplier is 2.6. Every dollar of direct labor must bring in $2.60 of net service revenue just to break even.

Change order

Also called Additional services, Contract amendment, Scope change

A written amendment, agreed by both parties, that changes a contract’s scope, fee or schedule. Firms use change orders to get paid for work the original agreement did not include.

Work performed on a verbal request before the change order is signed is a common source of write-downs, because the client never agreed to pay for it.

Contingency

Also called Fee contingency, Risk allowance

An amount added to a fee or budget to cover risks and unknowns that cannot be estimated item by item. It is held in reserve and is not tied to any specific task.

A $200,000 labor estimate carrying a 10 percent contingency is priced at $220,000. Contingency spent on scope growth the client should pay for belongs in a change order instead.

Days sales outstanding

Also called DSO, Collection period, Average collection period

The average number of days it takes a firm to collect payment after revenue is invoiced. Lower DSO means cash arrives sooner and less working capital is tied up in receivables.

Accounts receivable / revenue for the period × days in the period

With $450,000 in receivables and $900,000 billed over the last 90 days, DSO is 45 days. Some firms add unbilled work in progress to measure days revenue outstanding.

Direct labor cost

Also called Direct labor, DL, Raw labor cost

The base salary or wage cost of hours charged to projects, before fringe benefits, overhead or profit. It is the base that overhead rates and multipliers are measured against.

Billable hours × employee hourly pay rate

Fixed fee

Also called Lump sum, Stipulated sum, Firm fixed price

A contract in which the firm agrees to deliver a defined scope for a set price, regardless of the hours it takes. The firm keeps savings and absorbs overruns.

Fixed-fee work is usually billed by percent complete against a schedule of values, and scope beyond the agreement is handled by change order.

Go/no-go decision

Also called Bid/no-bid, Pursuit decision

A structured decision, made before committing proposal effort, on whether to pursue an opportunity. It weighs client relationship, fit with the firm’s experience, competition, staffing, risk and fee potential.

Firms often score each factor and set a threshold, so the decision is consistent and declined pursuits free capacity for better-fit work.

Hit rate

Also called Win rate, Win ratio, Capture rate

The share of submitted proposals a firm wins, measured by count or by fee value. Tracking both shows whether the firm wins many small jobs or a few large ones.

Proposals won / proposals decided

Twelve wins out of 40 decided proposals is a 30 percent hit rate by count. Excluding proposals still awaiting a decision keeps the rate from looking artificially low.

Multiplier

Also called Effective multiplier, Net multiplier, Labor multiplier

The ratio of net service revenue to direct labor cost, showing how many revenue dollars each dollar of direct labor produces. Firms also quote a contract multiplier used to set billing rates from salaries.

Net service revenue / direct labor cost

A project with $300,000 of net service revenue and $100,000 of direct labor has an effective multiplier of 3.0. Compare it to the breakeven multiplier to see the profit margin.

Net service revenue

Also called NSR, Net revenue, Net fee

Revenue earned by a firm’s own staff: gross revenue minus subconsultant fees and reimbursable expenses passed through to the client. It is the basis for multipliers and most profitability measures.

Gross revenue − subconsultant costs − reimbursable expenses

Not to exceed

Also called NTE, Upset limit, Ceiling, Cap

A ceiling on the total a client will pay under an hourly or time and materials contract. The firm bills actual time and expenses up to the cap and absorbs anything above it without a change order.

An NTE combines the downside of a fixed fee with none of its upside: the firm still bills only actual hours, so underruns go to the client.

Overhead rate

Also called Indirect cost rate, OH rate

Total indirect costs, including fringe benefits, unbilled staff time, rent, insurance and administration, expressed as a percentage of direct labor cost. It shows what each direct labor dollar must also carry.

Total indirect costs / direct labor cost

With $1.6M in indirect costs and $1.0M in direct labor, the overhead rate is 160 percent. Public agencies often audit this rate for cost-based contracts.

Percent complete

Also called Percent of completion, Earned value

An estimate of how much of a project’s or task’s scope has been performed, used to bill fixed-fee work and to recognize revenue. It should reflect work done, not budget spent.

Fee earned = contract fee × percent complete

A $50,000 phase judged 40 percent complete has earned $20,000. If $12,000 was billed before, this period’s invoice is $8,000.

Progress billing

Also called Progress invoicing, Periodic billing

Invoicing a client at regular intervals, usually monthly, for the portion of the contract earned to date rather than waiting for completion. It keeps cash flowing on long projects.

Current invoice = fee earned to date − amount previously billed

Project sheet

Also called Project profile, Project description, Case study

A one-page summary of a completed project for proposals: client, location, size, cost, dates, services provided, key staff and outcomes. Firms keep a library and tailor sheets to each pursuit.

In an SF 330, the same information appears as Section F project examples, which Section G cross-references to key personnel.

Proposal resume

Also called Project resume, Staff resume

A short resume of a team member written for a specific pursuit, highlighting the role proposed, credentials, registrations and relevant project experience rather than full career history.

In an SF 330, these are the Section E resumes of key personnel, each listing up to five relevant projects.

Pursuit

Also called Capture, Opportunity, Lead

An opportunity a firm has decided to chase, from first identification through positioning, proposal and interview to award or loss. Pursuit costs are overhead, so firms track them against fees won.

Qualifications-based selection

Also called QBS, Brooks Act, Brooks Act selection

A procurement method that ranks firms on qualifications and competence, then negotiates a fair fee with the top-ranked firm. Required for federal architect-engineer contracts by the Brooks Act (40 U.S.C. chapter 11) and FAR subpart 36.6.

The agency ranks at least three most highly qualified firms and negotiates with the first. If they cannot agree on a fair price, negotiations end and move to the next firm. Many states have similar laws.

Realization rate

Also called Realization, Billing realization

The share of the value of time worked, at standard billing rates, that a firm actually earns or collects. Shortfalls come from write-downs, fixed-fee overruns and discounts.

Revenue earned / (hours worked × standard billing rates)

If staff record $100,000 of time at standard rates and the firm can bill $88,000, realization is 88 percent.

Request for proposal

Also called RFP

A solicitation in which a client describes a project and asks firms to submit a proposal, usually covering approach, team, schedule, experience and often fee. Evaluation may weigh price alongside qualifications.

Request for qualifications

Also called RFQ, Request for statement of qualifications, RFSOQ

A solicitation asking firms to submit their qualifications, experience and team, without a fee, so the client can shortlist or rank them. It is the usual first step in qualifications-based selection.

In construction and other fields, RFQ can instead mean request for quotation, a price request. Read the solicitation to confirm which is meant.

Retainage

Also called Retention, Holdback

A percentage of each progress payment the client withholds until the project or a milestone is complete, as security for performance. It is earned revenue the firm collects later.

With 5 percent retainage, a $40,000 invoice pays $38,000 now and $2,000 at closeout. Retainage is still receivable and should be tracked so it is actually billed.

Retainer

Also called Advance payment, Deposit

Money a client pays before work begins, held by the firm and applied against invoices, typically the final one. Unlike retainage, it is paid by the client in advance rather than withheld.

A retainer is a liability until it is applied, so it should not be counted as revenue when received.

Schedule of values

Also called SOV, Fee breakdown

A breakdown of a contract’s total fee into phases or tasks, each with its own value. Progress invoices report percent complete and amount earned against each line.

A $200,000 fee might split into schematic design $30,000, design development $40,000, construction documents $80,000 and construction administration $50,000.

SF 330

Also called Standard Form 330, Architect-Engineer Qualifications, SF330

The federal Standard Form 330, Architect-Engineer Qualifications, which agencies use to evaluate A-E firms. Part I covers qualifications for a specific contract; Part II covers a firm or office’s general qualifications.

FAR 36.603 and 36.702 govern its use. Part I includes key personnel resumes (Section E) and example projects (Section F).

Time and materials

Also called T&M, Hourly, Hourly plus expenses, Cost plus

A contract billed on hours actually worked at agreed hourly rates, plus reimbursable expenses, usually with a markup. The client carries the risk of the hours, often limited by a not-to-exceed cap.

Unbilled revenue

Also called Unbilled receivables, Unbilled WIP

Revenue a firm has earned through work performed but has not yet invoiced. It sits on the balance sheet as an asset until billed and is the part of work in progress at risk of delay.

Utilization rate

Also called Utilization, Chargeability, Billability

The percentage of an employee’s or the firm’s total paid hours charged to projects. It is a leading indicator of profitability because unbilled time becomes overhead.

Billable hours / total hours paid

An engineer with 1,560 billable hours out of 2,080 paid hours has a 75 percent utilization rate. Targets differ by role, so compare against role-specific goals.

Win/loss review

Also called Debrief, Post-award debrief, Lessons learned

A structured look back at a pursuit after award, using client debriefs and team input, to learn why the firm won or lost. Findings feed future go/no-go decisions and proposal content.

Work in progress

Also called WIP, Work in process, WIP report

Work a firm has performed and recorded but not yet invoiced, valued at billing rates or contract terms. A WIP report lists it by project so each item is billed, held or written down.

Reviewing WIP before each billing cycle catches time charged to the wrong project, work beyond the contract and items that need a change order.

Write-down

Also called Write-off, Adjustment

A reduction in the billable value of recorded work, made when time cannot be billed, such as rework, scope overruns on a fixed fee or effort without a change order. It lowers realization.

Write-ups are the reverse: billing more than recorded value, as when a fixed-fee task finishes under budget.

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Glossary

Glossary of project, proposal and billing terms

The words that come up in pursuits, billing and firm finances, defined plainly.

Backlog

Also called Contracted backlog, Work on hand

The value of signed contract work a firm has not yet performed, measured as total contracted fees minus fees already earned. It shows how many months of revenue are secured before new wins.

Total contracted fees − fees earned to date

Dividing backlog by average monthly net service revenue gives months of backlog. A firm with $1.8M in backlog earning $300K a month holds six months of work.

Billable hours

Also called Chargeable hours, Direct hours

Breakeven multiplier

The multiplier on direct labor at which a firm covers its direct labor and overhead but earns no profit. Any effective multiplier above it contributes to profit; any below it loses money.

1 + overhead rate

With an overhead rate of 160 percent, the breakeven multiplier is 2.6. Every dollar of direct labor must bring in $2.60 of net service revenue just to break even.

Change order

Also called Additional services, Contract amendment, Scope change

A written amendment, agreed by both parties, that changes a contract’s scope, fee or schedule. Firms use change orders to get paid for work the original agreement did not include.

Work performed on a verbal request before the change order is signed is a common source of write-downs, because the client never agreed to pay for it.

Contingency

Also called Fee contingency, Risk allowance

An amount added to a fee or budget to cover risks and unknowns that cannot be estimated item by item. It is held in reserve and is not tied to any specific task.

A $200,000 labor estimate carrying a 10 percent contingency is priced at $220,000. Contingency spent on scope growth the client should pay for belongs in a change order instead.

Days sales outstanding

Also called DSO, Collection period, Average collection period

The average number of days it takes a firm to collect payment after revenue is invoiced. Lower DSO means cash arrives sooner and less working capital is tied up in receivables.

Accounts receivable / revenue for the period × days in the period

With $450,000 in receivables and $900,000 billed over the last 90 days, DSO is 45 days. Some firms add unbilled work in progress to measure days revenue outstanding.

Direct labor cost

Also called Direct labor, DL, Raw labor cost

The base salary or wage cost of hours charged to projects, before fringe benefits, overhead or profit. It is the base that overhead rates and multipliers are measured against.

Billable hours × employee hourly pay rate

Fixed fee

Also called Lump sum, Stipulated sum, Firm fixed price

A contract in which the firm agrees to deliver a defined scope for a set price, regardless of the hours it takes. The firm keeps savings and absorbs overruns.

Fixed-fee work is usually billed by percent complete against a schedule of values, and scope beyond the agreement is handled by change order.

Go/no-go decision

Also called Bid/no-bid, Pursuit decision

Firms often score each factor and set a threshold, so the decision is consistent and declined pursuits free capacity for better-fit work.

Hit rate

Also called Win rate, Win ratio, Capture rate

The share of submitted proposals a firm wins, measured by count or by fee value. Tracking both shows whether the firm wins many small jobs or a few large ones.

Proposals won / proposals decided

Twelve wins out of 40 decided proposals is a 30 percent hit rate by count. Excluding proposals still awaiting a decision keeps the rate from looking artificially low.

Multiplier

Also called Effective multiplier, Net multiplier, Labor multiplier

Net service revenue / direct labor cost

A project with $300,000 of net service revenue and $100,000 of direct labor has an effective multiplier of 3.0. Compare it to the breakeven multiplier to see the profit margin.

Net service revenue

Also called NSR, Net revenue, Net fee

Revenue earned by a firm’s own staff: gross revenue minus subconsultant fees and reimbursable expenses passed through to the client. It is the basis for multipliers and most profitability measures.

Gross revenue − subconsultant costs − reimbursable expenses

Not to exceed

Also called NTE, Upset limit, Ceiling, Cap

A ceiling on the total a client will pay under an hourly or time and materials contract. The firm bills actual time and expenses up to the cap and absorbs anything above it without a change order.

An NTE combines the downside of a fixed fee with none of its upside: the firm still bills only actual hours, so underruns go to the client.

Overhead rate

Also called Indirect cost rate, OH rate

Total indirect costs / direct labor cost

With $1.6M in indirect costs and $1.0M in direct labor, the overhead rate is 160 percent. Public agencies often audit this rate for cost-based contracts.

Percent complete

Also called Percent of completion, Earned value

An estimate of how much of a project’s or task’s scope has been performed, used to bill fixed-fee work and to recognize revenue. It should reflect work done, not budget spent.

Fee earned = contract fee × percent complete

A $50,000 phase judged 40 percent complete has earned $20,000. If $12,000 was billed before, this period’s invoice is $8,000.

Progress billing

Also called Progress invoicing, Periodic billing

Invoicing a client at regular intervals, usually monthly, for the portion of the contract earned to date rather than waiting for completion. It keeps cash flowing on long projects.

Current invoice = fee earned to date − amount previously billed

Project sheet

Also called Project profile, Project description, Case study

A one-page summary of a completed project for proposals: client, location, size, cost, dates, services provided, key staff and outcomes. Firms keep a library and tailor sheets to each pursuit.

In an SF 330, the same information appears as Section F project examples, which Section G cross-references to key personnel.

Proposal resume

Also called Project resume, Staff resume

A short resume of a team member written for a specific pursuit, highlighting the role proposed, credentials, registrations and relevant project experience rather than full career history.

In an SF 330, these are the Section E resumes of key personnel, each listing up to five relevant projects.

Pursuit

Also called Capture, Opportunity, Lead

An opportunity a firm has decided to chase, from first identification through positioning, proposal and interview to award or loss. Pursuit costs are overhead, so firms track them against fees won.

Qualifications-based selection

Also called QBS, Brooks Act, Brooks Act selection

Realization rate

Also called Realization, Billing realization

The share of the value of time worked, at standard billing rates, that a firm actually earns or collects. Shortfalls come from write-downs, fixed-fee overruns and discounts.

Revenue earned / (hours worked × standard billing rates)

If staff record $100,000 of time at standard rates and the firm can bill $88,000, realization is 88 percent.

Request for proposal

Also called RFP

Request for qualifications

Also called RFQ, Request for statement of qualifications, RFSOQ

A solicitation asking firms to submit their qualifications, experience and team, without a fee, so the client can shortlist or rank them. It is the usual first step in qualifications-based selection.

In construction and other fields, RFQ can instead mean request for quotation, a price request. Read the solicitation to confirm which is meant.

Retainage

Also called Retention, Holdback

A percentage of each progress payment the client withholds until the project or a milestone is complete, as security for performance. It is earned revenue the firm collects later.

With 5 percent retainage, a $40,000 invoice pays $38,000 now and $2,000 at closeout. Retainage is still receivable and should be tracked so it is actually billed.

Retainer

Also called Advance payment, Deposit

Money a client pays before work begins, held by the firm and applied against invoices, typically the final one. Unlike retainage, it is paid by the client in advance rather than withheld.

A retainer is a liability until it is applied, so it should not be counted as revenue when received.

Schedule of values

Also called SOV, Fee breakdown

A breakdown of a contract’s total fee into phases or tasks, each with its own value. Progress invoices report percent complete and amount earned against each line.

A $200,000 fee might split into schematic design $30,000, design development $40,000, construction documents $80,000 and construction administration $50,000.

SF 330

Also called Standard Form 330, Architect-Engineer Qualifications, SF330

FAR 36.603 and 36.702 govern its use. Part I includes key personnel resumes (Section E) and example projects (Section F).

Time and materials

Also called T&M, Hourly, Hourly plus expenses, Cost plus

A contract billed on hours actually worked at agreed hourly rates, plus reimbursable expenses, usually with a markup. The client carries the risk of the hours, often limited by a not-to-exceed cap.

Unbilled revenue

Also called Unbilled receivables, Unbilled WIP

Revenue a firm has earned through work performed but has not yet invoiced. It sits on the balance sheet as an asset until billed and is the part of work in progress at risk of delay.

Utilization rate

Also called Utilization, Chargeability, Billability

The percentage of an employee’s or the firm’s total paid hours charged to projects. It is a leading indicator of profitability because unbilled time becomes overhead.

Billable hours / total hours paid

An engineer with 1,560 billable hours out of 2,080 paid hours has a 75 percent utilization rate. Targets differ by role, so compare against role-specific goals.

Win/loss review

Also called Debrief, Post-award debrief, Lessons learned

A structured look back at a pursuit after award, using client debriefs and team input, to learn why the firm won or lost. Findings feed future go/no-go decisions and proposal content.

Work in progress

Also called WIP, Work in process, WIP report

Work a firm has performed and recorded but not yet invoiced, valued at billing rates or contract terms. A WIP report lists it by project so each item is billed, held or written down.

Reviewing WIP before each billing cycle catches time charged to the wrong project, work beyond the contract and items that need a change order.

Write-down

Also called Write-off, Adjustment

A reduction in the billable value of recorded work, made when time cannot be billed, such as rework, scope overruns on a fixed fee or effort without a change order. It lowers realization.

Write-ups are the reverse: billing more than recorded value, as when a fixed-fee task finishes under budget.

The numbers behind these words, from your own work

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Glossary of project, proposal and billing terms

Backlog

Billable hours

Breakeven multiplier

Change order

Contingency

Days sales outstanding

Direct labor cost

Fixed fee

Go/no-go decision

Hit rate

Multiplier

Net service revenue

Not to exceed

Overhead rate

Percent complete

Progress billing

Project sheet

Proposal resume

Pursuit

Qualifications-based selection

Realization rate

Request for proposal

Request for qualifications

Retainage

Retainer

Schedule of values

SF 330

Time and materials

Unbilled revenue

Utilization rate

Win/loss review

Work in progress

Write-down

The numbers behind these words, from your own work

Trabalho melhor, juntos.

Glossary of project, proposal and billing terms

Backlog

Billable hours

Breakeven multiplier

Change order

Contingency

Days sales outstanding

Direct labor cost

Fixed fee

Go/no-go decision

Hit rate

Multiplier

Net service revenue

Not to exceed

Overhead rate

Percent complete

Progress billing

Project sheet

Proposal resume

Pursuit

Qualifications-based selection

Realization rate

Request for proposal

Request for qualifications

Retainage

Retainer

Schedule of values

SF 330

Time and materials

Unbilled revenue

Utilization rate

Win/loss review

Work in progress

Write-down

The numbers behind these words, from your own work

Trabalho melhor, juntos.