What is Performance Obligation?

In the context of construction, a performance obligation refers to the promises made by a contractor to a customer in exchange for payment. These promises typically include the construction of a building or structure according to the agreed-upon specifications, timelines, and quality standards. The performance obligation also encompasses any additional services or deliverables that are included in the construction contract, such as design services, project management, or post-construction maintenance.For construction companies, identifying and fulfilling performance obligations is crucial for managing project risks and ensuring customer satisfaction. By clearly defining the scope of work and deliverables in the contract, both parties have a clear understanding of what is expected and can hold each other accountable throughout the project. This helps to minimize disputes and delays, as well as ensure that