Final Accounts

Question 1

How long do you get to settle a final account under the forms of contract you are most familiar with?

Answer 1

JCT Standard Building Contract (clause 4.5) - The contractor has 6 months from the date of Practical Completion to submit all the necessary details for the QS to make the final adjustment to the contract sum, and the QS then has 3 months in which to make the final adjustment.

JCT Design and Build Contract (clause 4.12) - The contractor has 3 months from the date of Practical Completion to submit their Final Statement. If they do not provide it within this period the Employer notifies the contractor that he has a further 2 months in which to submit it or the Employer will submit his own Final Statement in lieu of that of the contractor.

Question 2

What is the Final Statement conclusive of under a D&B contract?

Answer 2

• All extensions of time due have been awarded
• The quality of materials and goods specified are to the satisfaction of the Employer
• All claims have been settled
• Unless challenged within 28 days of the due date for final payment the Final Statement is conclusive and cannot be challenged.

Question 3

What is the structure of a Final Account?

Answer 3

• Summary
• Variable costs; Provisional sums, Prime Costs, Day works, Approx quants
• Variations
• Contract Instructions
• L&E
• Fluctuations
• Risk allowances

Question 4

What would ISO9001 look for in a Final Account?

Answer 4

• Project Control Plan
• Instructions
• FA structure
• Statement prepared
• Statement distributed to A / CA
• Disputes recorded & resolved
• Page numbers / comping

Question 5

What is Final Account?

Answer 5

• Conclusion of the contract um
• Includes L&E / EoT / Finalisation of disputes
• Excludes LD’ / VAT / interest on overdue payments
• End of financial obligations except defects
• Contractor substantiates, Employer assesses

Question 6

What is included in a Final Account Statement?

Answer 6

• Usually covers the headers of the structure of the FA
• Statement of ‘full & final settlement’
• Not LD’s - taken in a pay less notice

Contract sum - Risk allowance (+/-) omissions / additions = FA total

Question 7

How is retention affected at Final Account?

Answer 7

• If agreed at PC, the Employer can release %
• If it is to be agreed then the Employer can release a % of the amount they feel is due
• If the FA is not agreed at the end of the defects libaility period, release only what is agreed
• Retention on disputed items not released
• Final certificate only released when the FA is agreed

Question 8

How is a FA managed on an NEC?

Answer 8

• No reference to FA
• CE are time barred, making it more of a rolling FA
• On going so the FA is agreed by the final CE agreement

Question 9

What contractor documents are needed for final account?

Answer 9

• Day work sheets
• Subcontractor quotes
• Substantiation to variation
• L&E claims

Question 10

How is a FA prepared??

Answer 10

• Scheduling out the cost impacts e.g.
  Prov sums (most agreed, possible later ones such as FF&E)
  Prime costs
  L&E
  Approx quants
  Fluctuations
  Contra charges (variation in SBC or pay less notice)
• Should only be the difference in variatiosn from final monthly report

Question 11

What should a PM prepare to manage the FA?

Answer 11

Project Execution Plan
- Contract admin procedures
- Change control mechanisms
- Instruction procedure

Allows the employer to make informed decisions, auditable, notification & times as in contract

Question 12

What is the QS role in FA?

Answer 12

• Prepare FA
• Value variations
• Advise on cost implications of L&E
• Advise on defects costings
• Calculations or withholding LD’s
• Preparing statement
• Outside of contractor account may report on; professional fee tracking, Section 106 / 278, CIL, VAT

Ultimately the agreement is between the Employer and Contractor

Question 13

What are the causes of dispute when it comes to FA?

Answer 13

• Change in personnel - method of valuing
• Defects where another contractor is used
  Was there a defect?
  Unsatisfactory work by 2nd Contractor
• Value of variations

Question 14

How are disputes managed when it come to FA?

Answer 14

• Construction Act requires Adjudication
• Settlement agreements
  
  • FA not agreed
  • Solicitor, not a QS
  • Wrap up outstanding disputes
  • Doesn’t change liabilities of latent defects, warranties & bonds

Question 15

What if there are defects at final account?

Answer 15

Patent defects - Plain to see! Discoverable by reasonable inspection. Cannot agree to final account
Latent defects - Not discoverable by reasonable inspection. Discovered later. Final Account may be agreed

After DLP, further defects are claimed through negligence through Limitation Act 1980 ( 6 yrs / 12 years)