Raise a back-charge

Recover cost from a subcontractor — cleanup, rework, delay damages, or other costs incurred because of the sub's actions — by raising a negative-value variation against the subcontract.

When to use this

When you need to charge the subcontractor for cleanup, rework, delay damages, or other costs incurred because of the sub's actions, and you want the recovery reflected against the subcontract's value (rather than as a separate Debit Memo).

Prerequisites

• Subcontract in Active, PC, DLP, or Final status
• A clearly-defined cost amount and reason, and the SoV line(s) it comes off
• The sub has been informed in writing (process — not enforced by the system)
• Permission to create and approve variations for this subcontract's subsidiary

Walkthrough

1. Open the Subcontract record, go to the Variations subtab and click New FC PF Subcontract Variation.
2. Set the Variation Type to Cost Decrease or Defects (the type that best matches the reason).
3. Set the Reason to the appropriate code — the available reasons are Owner Variation, Design Change, Site Condition, Error, Omission, Client Directive and Other. (Defects is a variation Type, not a Reason.)
4. Add a clear explanation in the Description field. It's the variation's text wherever it's listed, so the reason for the back-charge is visible on the subcontract and in the audit trail.
5. On the Schedule of Values subtab, enter a negative-value line and choose the line it comes off in Varies Line — an original contract line or an addition on an earlier approved variation. The line's Item, Cost Centre and Phase are filled in from that line. A deduction can't be added without a Varies Line, and it can't take that line below $0. See Raise a subcontract variation.
6. Save. Value (Signed) shows the total of the lines, a negative amount.
7. Set the variation's Status to Pending Approval, then Approved, through the normal variation workflow — see Approve a subcontract variation.

On approval, the deduction reduces the line it varies on the PO (rather than adding a negative line) and reduces the Revised Contract Value. The next claim the sub raises will reflect the reduced contract value.

When to use a Debit Memo instead

If the back-charge needs to be visible to AP as a separate posting (rather than netted into the subcontract value), raise a Debit Memo against the vendor instead. The Debit Memo is independent of the Subcontracts feature — it's standard NetSuite AP. Use the variation approach when you want the recovery reflected on the subcontract's contract value; use a Debit Memo when you want the recovery posted as a separate AP transaction.

What success looks like

• A Variation record on the Subcontract, with Type Cost Decrease or Defects and a negative value, in Approved status.
• The Subcontract's Revised Contract Value has reduced by the back-charge amount.
• Subsequent claims by the sub reflect the reduced contract value.
• The audit trail records the back-charge reason, approver, and approval date.

Gotchas

• Nothing stops a back-charge reducing the contract value below what has already been claimed and paid. There is no system gate on this — check the claimed-to-date position yourself before approving a large deduction.
• No sub-acknowledgment step exists yet. Coordinate with the sub before approval, especially if the back-charge is contentious. The dedicated Back-Charge workflow (roadmap) will add an explicit acknowledgment step.
• Variations of type Defects may need separate evidence. Attach photos, inspection reports, or correspondence to the variation record so the audit trail is complete.
• A back-charge has a variation estimate too. Like any variation, it gets a Sales Estimate on the project with its negative lines — see The variation estimate.
• A back-charge raised this way is irreversible by the same mechanism. If you need to reverse it, raise another offsetting variation with a positive value.

Related

• Raise a subcontract variation
• Approve a subcontract variation
• Assess a subcontractor claim
• Subcontract states