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Quantity Surveyors Interim Valuations

Most standard forms of contract have a provision to pay the contractor on a stage payment or quantum meruit basis, as the work proceeds. Without this provision the contractor would have to wait until the end of the contract before receiving payment and this would clearly be unworkable from a cash flow perspective. The stage payments or interim accounts are prepared usually on a monthly basis by the contractor’s surveyor and the client’s quantity surveyor. Until recently it had been common practice in the construction industry for the contractor not to release money to domestic subcontractors until the contractor received payment, a system referred to as ‘pay when paid’. This practice caused many problems and disputes particularly between contractors and domestic subcontractors, as domestic subcontractors are not informed when the contractor receives payment and the contractor could withhold payment for weeks or longer. In 1996 the Housing Grants, Construction and Regeneration Act (referred to as the Construction Act) made pay when paid clauses unenforceable.

The Construction Act contained the following provisions for all construction contracts:
• Pay when paid clauses are unenforceable
• Payment by instalments for all contracts over 45 days’ duration
• The contractor is to be informed when payment is due as well as the amount
• The contractor is to be informed in the event of the client is to withholding payment
• The contractor has the right to withdraw from the site if not paid within a specified period.

When preparing an interim valuation the following items may be included, if appropriate:
• Preliminaries as included in the bills of quantities
• Measured works as included in the bills of quantities
• Value of variations and extra works
• Work carried out by nominated subcontractors and suppliers
• Materials on site
• Materials off site
• Fluctuations
• Approved loss and expense claims.

Shortly before the valuation date the sub-contractors and suppliers will submit their own interim valuations to the main contractor and these are included in the interim payment. Sub-contractors and suppliers payments are paid to the main contractor, who then pays them in turn, less any agreed discounts. Sub-contractors and suppliers are informed of the amount due and the main contractor must pay them within a prescribed period; if the main contractor withholds payment, then there is provision for the employer to pay them directly.

Despite the obligations on the architect and the quantity surveyor to produce both interim certificates and valuations, interim valuations are generally carried out together, i.e. between quantity surveyors, so that agreement can be reached between parties before certification.

By: Seamus75

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