Test Criteria | Contractor Services of America

This test's weight is half of the Contractors Standardized Financial Test score. It uses information gathered from the below criteria test. CSOA analyzes profit growth and fade as compared to revenue changes on completed contracts and applies it to the current project list. Analyzing monthly cash outlays, including all SG&A and cash sources with any balloon payments due within the next 24 months. This information, along with time sensitive project income, is applied to the Company Durability and Survival Test. A final analysis of all this information produces the Company Durability and Survival Test score.

1. Billed vs. Cost vs. Percent Complete Booked - This test consists of a review of the current projects on the client's books. We look at the amount billed versus the cost versus the percent complete. This test yields two results. The first gives us insight into the company's opinion towards how complete they are and if they are billing enough. The second gives us insight into how the company feels it is performing compared to their project budget.

2. Collected vs. Cost vs. Percent Complete Booked - This test consists of a review of the current projects on the client's books. We look at the amount collected versus cost versus percent complete. This test yields two results. The first gives us insight into the owner of the project and general contractor's opinions toward our client's percent complete. The second gives us insight into the owner of the project and general contractor's opinion of how our client is performing compared to budget.

3. Proceeded On Pending Change Orders - This test consists of a review of the current projects on the client's books. We look at the percent of pending changes booked and not booked that the client has proceeded on. This test yields two results. The first gives us insight into how large of an exposure the contractor has to not being paid for work it is performing on booked pending changes that it has proceeded on, therefore affecting the booked contract value and profit. The second gives us insight into how large of an exposure the company has to not being paid for work it is performing on non-booked changes that it has proceeded on, therefore affecting the budgeted cost for their work which will effect the booked profit.

4. Proceeded On Claims - This test consists of a review of the current projects on the client's books. We look at the percent of claims booked and not booked that the client has proceeded on. This test yields two results. The first gives us insight into how large of an exposure the contractor has to not being paid for work it is performing on booked claims that it has proceeded on, therefore affecting the booked contract value and profit. The second gives us insight into how large of an exposure the company has to not being paid for work it is performing on non-booked claims that it has proceeded on, therefore effecting the budgeted cost for their work which will change the booked profit.

5. Project Revenue Growth - This test consists of a review of the twenty largest completed projects on the client's books. We look at the company's ability to grow the project revenue amount. This test gives us insight into the ability of the company to pursue and get paid for changes to the contract.

6. Profitability Strength - This test consists of a review of the twenty largest completed projects on the client's books. We look at the company's ability to hold and/or increase the original profit booked on their projects . This test gives us insight into the ability of the company to sustain its overall projected booked profit.

7. Backlog Profit Strength Adjusted - This test consists of a review of the current projects on the client's books. In this test, we evaluate the company's backlog and the profit built into the backlog then apply information gained from test #6 - Profitability Strength. This gives us a strong indication on the amount of profit the customer will yield on this backlog.

8. Strength of Available Cash Equity / Line of Credit - This test looks at what cash sources the company has, excluding projects. We examine if the available cash is within the company and/or family, from an outside source (equity partner, etc.) or a line of credit. We look at what the source is, their ability to access it and any balloon payments within the next two years, then analyze the amount of these sources compared to the amount required to cover overhead for up to eighteen months. This test tells us the ability of a company to survive through tough times without any income from projects. It could be because of the lack of new work or projects that are not performing.

9. Job Cost / WIP vs. Financial Statements - This is a level 2 or 3 test. It is not performed in a level 1 test. This test compares the total of all current projects on the job cost and WIP reports to the financial statements. The larger the variance in profit, the lower the score.

10. Internal Controls Review - This test evaluates the company's internal controls. They are asked thirty-four questions covering subjects such as insurance, financial statements, bank statements, incoming and outgoing checks and money, payroll controls, credit cards, theft prevention and important computer files. Their answers are tabulated and evaluated resulting in a test score.

11. On Site Project Review / Walk-Through Percent Complete vs. Percent Complete Booked - This is a level 2 or 3 test. It is not performed in a level 1 test. In this test, we select a sample of projects to walk. The walk through on these projects is handled by our construction management department. Their review of the contract value and their analysis of the percent complete on the project is compared to these same values on their books. We sit down with the project owner and/or general contractor to discuss their overall opinion of our client's performance. Any issues are discussed privately with our client prior to finalizing this test. Since this test does add some cost to the overall strength test, we discuss with the surety and/or bank the number of projects to walk.

12. General Company Walk Through Test - This is a level 2 or 3 test. It is not performed in a level 1 test. In this test, we evaluate the overall company. We will spend time in each of the departments. Our construction management team will talk to the estimating, purchasing and construction/project management departments while our financial team will talk to the various accounting departments. Our two teams come together for an overall score on the ability of this company to perform at their revenue level.