Glossary
Construction terms, defined for owners
The vocabulary of a construction project, written from the owner's point of view — what each term means and why it matters to the people paying for the work.
These are the terms owners and owner's representatives run into on a capital project. Each definition is industry-standard, framed for the owner's side. For how OwnerLogix puts these to work, see the use cases or the FAQ.
Owner's representative
An owner's representative (also called an owner's project manager or OPM) is a person or firm that manages a construction project on the owner's behalf, protecting the owner's interests in cost, schedule, scope, and quality. They are not the general contractor who builds the project; they sit on the owner's side of the table and oversee the contractor, the design team, and the budget. Owner's reps are common when an owner lacks in-house construction expertise or is running more projects than internal staff can manage.
Capital project
A capital project is a significant, long-term investment to build, expand, or substantially improve a physical asset — a new building, a major renovation, or infrastructure. Capital projects are funded from a capital budget rather than operating funds, and they are tracked by total project cost across their full lifecycle. A capital program is a portfolio of capital projects managed together.
Total project cost
Total project cost is the full cost of delivering a capital project, not just the construction contract. It combines hard costs (the physical construction), soft costs (design, permits, financing, FF&E, owner's staff), and contingency. Owners track total project cost because the board and lenders ask about the whole number, while a contractor's view typically covers only the construction scope.
Hard costs
Hard costs are the costs of the physical construction itself — labor, materials, equipment, and the work of the general contractor and subcontractors. They are the most visible part of a budget and usually the largest. Hard costs are distinguished from soft costs, which are the non-construction costs of getting a project built.
Soft costs
Soft costs are the project costs that are not physical construction: architectural and engineering design, permits and fees, legal, financing and interest, insurance, FF&E (furniture, fixtures, and equipment), and the owner's own project staff. They can run a meaningful share of total project cost and are easy to underestimate. Owners track soft costs alongside hard costs to see the true total project cost.
Contingency
Contingency is money set aside in a budget to cover unforeseen costs — changes, unknown conditions, and estimating gaps — without blowing the total. It is typically expressed as a percentage of the construction or total budget and is drawn down as issues arise. Owners watch contingency closely because how much remains, relative to how much project is left, is a leading indicator of budget risk.
Change order
A change order is a formal, written modification to the construction contract that changes the scope, price, or schedule after the contract is signed. Change orders arise from owner-requested changes, design errors or omissions, unforeseen conditions, or RFIs that reveal a gap. For the owner, each change order is a commitment of additional money and often time, so reviewing and approving them — against the budget and contingency — is a core control.
RFI (Request for Information)
An RFI, or Request for Information, is a formal question raised during construction — usually by the contractor or a subcontractor — to clarify something ambiguous or missing in the drawings, specifications, or contract documents. The design team issues a response, and the RFI is logged in the contractor's field system. RFIs matter to owners because slow responses can delay work and an RFI often signals a coming change order.
Submittal
A submittal is documentation a contractor or supplier provides for the design team's and owner's review before a material, product, or assembly is fabricated or installed — shop drawings, product data, and samples. An approved submittal is the record that what gets built matches what was specified. Submittals are reviewed and marked approved, revise-and-resubmit, or rejected, and slow review can delay procurement and the schedule.
Pay application
A pay application (or payment application) is the contractor's formal request for payment for work completed during a billing period, typically on the AIA G702/G703 forms. It lists each line of the schedule of values, the work completed to date, the amount retained, and the amount due this period. The owner or owner's rep reviews the pay application against actual progress before approving payment.
Retainage
Retainage (or retention) is a percentage of each progress payment — commonly 5 to 10 percent — that the owner withholds from the contractor until the work is substantially or finally complete. It gives the owner leverage to ensure the contractor finishes the job and corrects deficiencies. Retainage is released according to the contract, often reduced at substantial completion and paid out at closeout.
Schedule of values
A schedule of values (SOV) is a detailed breakdown of the contract sum into individual line items of work, each with an assigned dollar value. It is the basis for progress billing: each pay application reports the percent complete and dollars earned against each SOV line. Owners use it to verify that billed amounts track actual progress.
Cost code
A cost code is a standardized number used to classify and track costs by category of work — often based on CSI MasterFormat divisions. Budgets, commitments, and invoices are tagged to cost codes so an owner can see budget versus actual at a meaningful level of detail. A consistent cost-code structure lets an owner compare costs across projects.
Budget baseline
A budget baseline is the approved budget at a point in time, against which actual and forecast costs are measured. Keeping a baseline — and tracking revisions to it — lets an owner answer not just where the budget stands today, but how it got there and what changed it. Variance is the difference between the baseline and the current or forecast cost.
Substantial completion
Substantial completion is the milestone at which the project is complete enough for the owner to use it for its intended purpose, even if minor items remain. It is a contractually significant date: it often starts warranty periods, shifts responsibility for utilities and insurance, and triggers the release of part of the retainage. The remaining minor items are tracked on a punch list.
Punch list
A punch list is the list of incomplete or deficient items the contractor must finish or correct before the project is considered finally complete. It is generated near substantial completion, usually from a walkthrough by the owner, owner's rep, and design team. Final payment and the release of remaining retainage typically depend on the punch list being closed out.
Certificate of insurance (COI)
A certificate of insurance (COI) is a document proving that a contractor, consultant, or supplier carries the insurance coverage the contract requires — general liability, workers' compensation, and others. Owners collect a current COI from every firm on a project and track its expiration, because a lapsed COI exposes the owner to risk. Renewal is requested before each certificate expires.
Notice to proceed
A notice to proceed (NTP) is the owner's formal authorization for the contractor to begin work, often establishing the official start date and the clock for the contract duration. It usually follows contract execution and any required permits or financing. The NTP date anchors the schedule that the project is measured against.
Closeout
Closeout is the final phase of a project, when the punch list is completed, final payment and retainage are released, and the owner receives the closeout documents — warranties, as-built drawings, operation and maintenance manuals, and lien waivers. For the owner, closeout is also when the complete project record should become a permanent, independent archive, so the history survives after the contractor and any shared systems go away.
Value engineering
Value engineering (VE) is a structured review of a design to reduce cost or improve value without sacrificing required function or quality — for example, substituting a material or simplifying a detail. It is most effective early, before construction documents are final. Owners weigh VE proposals against long-term performance and operating cost, not just first cost.