Contract Administration

Question 1

INSOLVENCY

A domestic S/C asks to be paid directly, what do you do?

Answer 1

Highlight to them that payment to domestic subcontractors is the duty of the main contractor.

Question 2

INSOLVENCY

How would you check to see if a contractor was going into insolvency?

Answer 2

Dun and Bradstreet financial report can be carried out to check their current financial standing. Speak with their sub-contractors and see if they had been paid on time/in accordance with their contracts.

Question 3

INSOLVENCY

What happens when a contractor becomes insovent and what would you do?

Answer 3

Firstly establish through the bondsman that the contractor was insolvent, then inform the client and design team and advise them to stop all payments to the contractor. Advise to secure the site to prevent and plant or materials from being removed and undertake a detailed valuation of the works completed to ascertain the finantial status of the project. Then advise the client to consider the options available under JCT i.e. either employ another contractor to complete the works,negotiate with the reciver to allow the original contractor to complete the works if they are nearly finished, not complete the works at all or directly employ all sub contractors thus novating the project. Call in all bonds and guarantees to enable the project to be completed. NB if a new contractor is appointed collateral warranties should be checked as it’s unlikely he will cover work done by previous contractor.

Question 4

INSOLVENCY

What is a notional final account?

Answer 4

The notional final account is the current evaluation of how much the works currently to be undertaken under the contract and any variations instructed is valued at.

Question 5

INSOLVENCY

If a contractor goes insovent but the client needs the job finishing what options are available to him?

Answer 5

Apoint another contractor, negotiate with original contractors reciever to allow him to complete the works or directly employ the sub contractors himself.

Question 6

INSOLVENCY

What would happen to the contractors sub contractors?

Answer 6

Their contracts would also be determined.

Question 7

INSOLVENCY

Could the contractor remove plant after he had become insolvent?

Answer 7

If the contract has been determined properly the contractor would be notified to remove his plant and labour from the site and leave it secure. In reality the receiver would mst likely carry this out.

Question 8

INSOLVENCY

Can you suspend further payments if a contractor is insolvent?

Answer 8

Clause 8.5.3 under the SBC relieves the employer of their duty to make further payments to the contractor and suspends the contractor’s duty to complete the works.

Question 9

INSOLVENCY

A sub contractor says the contractor hasn’t paid him in a month, what do you advise?

Answer 9

I am not able to advise them directly. They should seek to resolve the issue with the Main Contractor.

Question 10

INSOLVENCY

What would you do if the CLIENT goes into recievership?

Answer 10

Advise the client to inform the contractor of his insolvency. It is likely the contractor would then determine his contract and his obligation to complete the works would be suspended. The contractor and S/C would then be allowed to remove their plant and equipment and any materials they still held title to. The contractor would then prpare an application for payment for the works completed so far and the client would be required to pay accordingly within 28 dyas. I would check this submission on the clients behalf and inform him of allof the above. I would also check with the reciever that I would be paid for my services.

Question 11

RETENTION

What is retention?

Answer 11

Retention is an amount deducted from interim certificates. It acts as an incentive for the contractor to complte the works and return to site to rectify and defects and also provides security for the employer should the contractor default. Projects under £500’000 = 5%, Projects over £500’000 = 3%. Amount of retention contained in appendix to contract.

Question 12

RETENTION

When is retention released?

Answer 12

Half is released at practicalcompletion and remainder is issued on completion of defects liability period when a certificate of making good defects is issued.

Question 13

RETENTION

What doesn’t retention apply to?

Answer 13

Retention does not apply to any loss and/or expense monies a contractor maybe entitled to.

Question 14

RETENTION

Are there any alternatives to retention?

Answer 14

Rentention bonds maybe offered in lieu.

Question 15

VALUATION / VARIATION

What methods of valuing variations are there?

Answer 15

First check architect has instructed variation. JCT98 C13.5 such as contract rates, contract rates plus fair allowance, fair and reasonable rates. Day works if no other means. As set down in the rules for carrying out valuations unless a contractors price statement or quotation under 13A have been accepted.

Question 16

VALUATION / VARIATION

What is included in a valuation?

Answer 16

Total value of meausred works including variations instructed, variations treated under the contract as if they were instructed, all works instructed relating to Prov Sums and all works for which an approx quantity has been inserted in the Bill. Listed items for Materials off site. Amounts for each Nominated S/C. Profits due on the Nominated S/C works.

Items in valuation not subject to retention:
Statutory fees, Opening up for inspection works, Any amounts due L&E and Antiquities, Any amounts relating to early final payment of Nominated S/C, Any amount payable under Clause 38 (contribution, levy and tax fluctuations) and Clause 39 (labour and materials cost and tax fluctuations).

Question 17

VALUATION / VARIATION

How would you value materials on site?

Answer 17

Contractor issues list of materials he is claiming for, clients QS then visits site to value materials. JCT C.30 states materials on site should only include items which are reasonabley, properly and not prematurely delivered to site.

Question 18

VALUATION / VARIATION

How would you value materials off site?

Answer 18

Check if item is listed in contract, then check claim isn’t too far In advance of the programme. Request a vesting certificate to confirm transfer of title to contractor, visit storage facility to check items are stored seperatley and clearly marked for project, ensure items are insured against loss and damage, check a bond had been taken up for uniquely identified items, check invoice as proof of payment from contractor. Recommend payment in interim certificate and pass to arcitect so they can isue certificate.

Question 19

VALUATION / VARIATION

If no materials were listed in the contract for payment off site would you still pay for materials off site?

Answer 19

No

Question 20

VALUATION / VARIATION

What is a vesting certificate?

Answer 20

A vesting certificate confirms the transfer of title to the contractor.

Question 21

VALUATION / VARIATION

Would you include defective materials in a valuation?

Answer 21

Any defective materials on site would be deemed ineligible for payment, however some wastage factors are applied to masonry materials so a limited amount is permissible. Defective materials off site would not be payable.

Question 22

VALUATION / VARIATION

How would you value defective materials?

Answer 22

Using the contract rates where possible. Or a on the basis of measurement and first principles i.e. material cost only.

Question 23

VALUATION / VARIATION

would you include contra charges would you include in a valuation?

Answer 23

Contra charges in my experience are only included in CM contracts. Otherwise under traditional, D&B and MC they are the responsibility of the Main Contractor to deduct from their own valuations.

Question 24

VALUATION / VARIATION

Who is responsible for assessing valuations under JCT 98?

Answer 24

CA who can then instruct the QS to ascertain the value the works on their behalf.

Question 25

VALUATION / VARIATION

Would you include architects verbal instructions?

Answer 25

Only if supported by an AI within 2 days of the CVI being issued.

Question 26

VALUATION / VARIATION

How would prelims be valued?

Answer 26

Check preliminaries against contract programme and contractors detailed breakdown. Visit site to ensure fixed preliminaries had been expended and that progress was in accordance with contract programme to ensure time related preliminaries were not overpaid.

Question 27

VALUATION / VARIATION

How would prelims be valued if the project was 6 weeks behind programme?

Answer 27

The prelims would be valued based on the contract programme and if no EOT had been issued then prelims would not be paid.

Question 28

VALUATION / VARIATION

How would you value prelims if the project was 6 weeks ahead of programme?

Answer 28

Pay those prelims due under the contract conditions.

Question 29

VALUATION / VARIATION

What is the difference between fixed cost and time related cost items?

Answer 29

Fixed costs are part of the contractors preliminaries and include items such as site set up, hoarding, site offices. Time related costs are also part of preliminaries and include items such as site management, plant hire, running expenses. Fixed costs are paid according to when expenditure for them occurred throughout contract period. Time related costs are paid monthly as a proportion of the contract period.

Question 30

VALUATION / VARIATION

Explain the payment process after a valuation?

Answer 30

The valuation is carried out by the QS this is then agreed with the Contractor, following this the QS issues their valuation certificate to the Architect / CA who would then certify amount due less any deductions for condemned works etc to the Client for payment.

Question 31

VALUATION / VARIATION

The client says he cannot pay the contractor this month but payments will be made within 60 days what would you advise?

Answer 31

The Client should be aware the Contractor may determined to contract 14 days after the final payment date if they issue a notice of determination. I would advise the Client to contact the Contractor and reach and agreement with contractor to resume payment in 60days and pay the contractor the interest owed on the amount due at 5% over base rate.

Question 32

VALUATION / VARIATION

What is included in Clause 13 JCT?

Answer 32

The variations clause.

Question 33

VALUATION / VARIATION

If a contractors quote is disapproved under 13A could you still instruct him to carry out the works?

Answer 33

Yes it would be subject to remeasurement under the Clause 13.

Question 34

VALUATION / VARIATION

When you omit work what does it effect?

Answer 34

The contract sum/final account, potentially the programme is reduced unless it is and undefined provisional sum.

Question 35

VALUATION / VARIATION

What happens if you can’t agree the amount of a valuation with the contractor?

Answer 35

Then I would submit a statement showing any disagreements with the gross valuation applied for as Clause 30.1.2.2. I would then try to resolve it for then next valuation.

Question 36

VALUATION / VARIATION

A supplier says there is a large quantity of materials on site which he has not been payed for and he wants them back, what do you do?

Answer 36

The contractor would be entitled to remove materials for the following:
- material is damaged, contaminated, etc
‘- storage presents a security problem
‘- storage creates a safety hazard
‘- material delivered prematurely to site
‘- materials/goods not in accordance with the Contract
‘- storage problem on site
‘- material delivered prematurely to site

Question 37

VALUATION / VARIATION

Would you deduct LAD’s from a valuation?

Answer 37

No the employer deducts them in accordance with contract i.e. from their interim payments.

Question 38

VALUATION / VARIATION

A contractor’s valuation is in excess of what it should be what do you do?

Answer 38

Reduce it in line with the conditions of the contract e.g. reduce measured works if over estimated.

Question 39

VALUATION / VARIATION

What are the timings of valuations?

Answer 39

Frequency of valuations is stated in contract conditions but are usually carried out monthly.

Question 40

VALUATION / VARIATION

During a valuation an item being claimed for has not been done do you pay for it?

Answer 40

No.

Question 41

VALUATION / VARIATION

Who insures materials off site?

Answer 41

Contractor

Question 42

VALUATION / VARIATION

What is retention of title?

Answer 42

The retention of title is the transfer of the title of goods until paid for. The title is transferred from contractor to employer once the goods are paid for, as per a vesting certificate.

Question 43

VALUATION / VARIATION

A contractor is claiming for materials on site which aren’t required for several weeks, do you pay?

Answer 43

Reduce the payment in line with the regular progress of the works i.e. do not pay for the MOnS which are not due to be installed imminently.

Question 44

VALUATION / VARIATION

What is an activity shedule and how are valuations prepared if one is used?

Answer 44

An activity schedule is used to chart the progress of the works and lump sums of money are place against activity items on the schedule and these are paid at the valuation when they have been completed (typically used for NEC).

Question 45

VALUATION / VARIATION

A contractor submits a daywork sheet for work which is the same as in the BOQ or schedule of work would you pay?

Answer 45

No the BQ or schedule take precedence over dayworks, even if the item is a variation.

Question 46

VALUATION / VARIATION

What is the difference between fixed cost and time related cost items?

Answer 46

A fixed cost is something at occurs a specific time e.g. site set up. A time related cost is something which is paid out periodically such a rental of site accommodation, scaffold hire etc.

Question 47

VALUATION / VARIATION

The client informs you that the contractor is on the brink of insolvency and instructs you to undervalue the works, what do you do.

Answer 47

I would instruct the Client to prepare a Notice of Determination and that the Contractor would still be entitled for the works which have been completed in accordance with the Contract.

Question 48

VALUATION / VARIATION

A contractor asks you to pay on account what do you do?

Answer 48

An on account payment may be made if there is fair and reasonable grounds for payment without substantiation. The payment may be withdrawn on a later valuation if no substantiation e.g. AI, CVI etc has been provided to the QS.

Question 49

VALUATION / VARIATION

What constitutes a variation under JCT 98?

Answer 49

A variation under JCT 98 is a item which has been instructed by the CA.

Question 50

VALUATION / VARIATION

How do you value a variation?

Answer 50

A variation is valued under Clause 13.

Question 51

VALUATION / VARIATION

How does JCT deal with variations?

Answer 51

A variations is based on an AI this is then valued using Clause 13.

Question 52

VALUATION / VARIATION

If the client says he is in financial difficulty and asks you not to value the works over a certain amount what would you do?

Answer 52

I would advise him of the amount I believe the valuation to be worth and advise him that he is liable to pay this under the conditions of the contract by the final payment date. He could then either negotiate with the Contractor to pay the amount he can and the interest on the rest until next month if he is able to pay. If not then the Contractor can issue a Notice of Determination under which he may Determine the contract with 14days and then pay the final account within 28days including a retention held.

Question 53

VALUATION / VARIATION

What is in place to protect the contractor from client non payment?

Answer 53

The Construction Act 1996 right to suspension (7days of notice) and the right to determine (14days of determination notice) under the contract.

Question 54

VALUATION / VARIATION

A supplier has not finished his item of work but the materials are clearly ready, would you pay for them?

Answer 54

I would advise the Client that the materials are not ready and that we would recommend the Architect assess the materials and works to be carried out to see if these were in accordance with the contract. If the Client was happy to pay for the materials element only on a pro-rata basis under the usual procedures for MOS then I would pay these.

Question 55

VALUATION / VARIATION

The contractor tells you he’s having cashflow problems this month what do you do?

Answer 55

I would ensure he is not claiming too much under the valuation. Then I would inform the Client that there is a potential problem.

Question 56

VALUATION / VARIATION

What are prime cost sums?

Answer 56

A Prime cost sum is a sum of money to be expended on works to carried out by nominated sub contractors or goods supplied by nominated suppliers. Contractor is then allowed to add on price for attendance and profit.

Question 57

VALUATION / VARIATION

How do you value prime cost sums in an interim valuation

Answer 57

First check architects instruction had been issued, this should identify the nominated sub contractor or supplier and value of the works to be carried out. Site visit to check works carried out or goods delivered, item valued on a pro rata basis depending on how much had been completed, contractors costs for attendance and profit also added on.

Question 58

VALUATION / VARIATION

What are provisional sums

Answer 58

Prov sums are allowances used to make provision for work which cannot be described or there is no design.

Question 59

VALUATION / VARIATION

What are defined and undefined provisional sums?

Answer 59

Defined provisional sums are allowed where all required information has been given and the ontractor is deemed to have allowed for programming, planning and preliminaries. Undefined items are allowed for when the required information is not avaliable and the contractor is not deemed to have allowed for programming, planning or preliminaries.

Question 60

VALUATION / VARIATION

How do you value provisional sums in an interim valuation?

Answer 60

Architect must issue an instruction authorising expenditure of PS,check if PS defined or undefined. For undefined sums would add on contractors costs for programming, planning and preliminaries.

Question 61

VALUATION / VARIATION

How do you value a contractors works for interim valuation?

Answer 61

Usually contractor would prepare an application for payment although no obligation to do so. Carry out site visit with contractor to make assessment of all measured work, ensure materials on and off site had been accounted for and were secure and free of defects, assess preliminaries including fixed and time related costs and assess the value of any work carried out in relation to PC or PS. Once the valuation was complete, establish a gross valuation, then deduct retention, and previous payments. Send a statement to the Contractor where the changes to their gross figure have been made. Submit valuation certificate to architect who can deduct amount for defective work then certify payment by issuing the interim certificate.

Question 62

VALUATION / VARIATION

What is a fluctuation clause?

Answer 62

A fluctuation clause provides a means for reimbursing a contractor for changes In output prices for which the contractor has no control e.g. tax, levy, labour and material price fluctuations. Under JCT adjustments can be made to the contract sum where a fluctuating price contract is requested under C. 38/39/40. Under fixed price contracts, fluctuation clauses are deleted.

Question 63

VALUATION / VARIATION

How do you calculate fluctuations in an interim valuation?

Answer 63

Various options for calculating fluctuations. Usually use price adjustment formula under C 40.

Question 64

VALUATION / VARIATION

What would you do if there was a disagreement regarding the value of a valuation?

Answer 64

I would speak with my partner and try to resolve the matter with the Contractor QS. If it could not be resolved then perhaps use ADR, adjudication, arbitration and then litigation.