Payment Flashcards
What are the 3 payment types? explain the 3 types
Advance payment; not allowed in uk
Interim payment;
Final payment
What is an interim valuation?
An interim valuation is when the total cost of that period is valued and a financial sum is provided to the contractor from the client.
An interim valuation gives the Contractor an opportunity to view how that period was valued in the PM’s point of view
What is a bond?
A bond allows the client/contractor (in this scenario the client) to directly gain a financial amount back when the other party becomes insolvent. The bondsmen must provide the financial amount back to those who receive the bond.
When is a Contractor entitled to periodic payments?
Contractors are entitle to periodic payments unless projects has duration of less than 45 days
What if no amount or interval has been agreed?
Part II of The Scheme determines the amount and interval
What is an interim certificate?
Interim certificates provide a mechanism for the client to make payments to the contractor before the works are complete.
State the key dates in order to provide a interim payment certificate and interim payment.
Also how many days before the interim payment is a witholding notice required?
- Contractor/QS calculates payment 7 days before the interim certificate
- 5 days payment notice by CA after the due interim certificate
- 14 days to make the payment for the interim payment
- 5 days before the interim payment to provide a withholding notice.
- An interim certificate period is 1 month long
What is included in the Interim Valuation Payment ?
1) Measured works;
2) Preliminaries;
3) Value of variations;
4) Materials on site Cl.4.16.2;
5) Off-site materials and goods – Cl.4.17;
6) Fluctuations – Cl.4.21;
7) Retention – Cl.4.18;
8) Claims – Cl.23.
Name the different types of Certificates in JCT and NEC
JCT Interim Certificate Final Certificate Practical Completion Non-Completion Completion of making good
NEC
Completion Certificate
Defect Certificate
Payment Certificates
How is the payment calculated in NEC?
The PM assess the amount on each assessment date and provides an interim payment certificate within 1 week of the assessment date.
When are the assessment dates in NEC?
The first assessment interval is decided by PM
The assessment dates occur at the end of each assessment interval until 4 weeks after the Superverisor issues the Defects Certificate and on the Completion date.
What is the payment procedure in NEC?
7 days before the certificate is the PM assessment
21 days to provide payment for the PM certificates
How do the main option clauses affect the amount of payment?
The rules for calculating amounts due for both interim and final payments vary according to the main options used
What is the payments for in Option C of NEC?
- Interim amounts – defined cost plus fee
2. Final amount – tendered price as the activity schedule plus or minus the contractor’s share
Does the Contract need to submit a payment application?
NEC
No, the PM must calculate the payment even if the Contractor does not provide a payment application
JCT
Contractor must provide a payment application 7 days before the interim certification date.
How is the assessment of payment judged in Option A in comparison to Option C?
Option A
assessment of the amount due is a straightforward matter of deciding which activities have been completed.
Option C
payments are based on costs paid or incurred, the assessment process can be time consuming and complex.
If costs are saved, the financial sum is appropriately split in proportion
Is retention included in the payment?
applies only when secondary option X16 is incorporated
Summarise Clause 51.1 NEC
- Subsequent payments are changes in amounts due from certificate to certificate
- If the change is a reduction the contractor pays the
employer - The project manager is required to certify payment
within 1 wk of each assessment date - The first payment is the whole amount certified (subject to any retention)
What works do not attract retention?
a) Fluctuations valued from using traditional method
b) Loss and/or expenses claims
c) Cost of opening up works (if found to be meet spec)
d) Statutory fees
e) Insurance payments by the contractor
When is one half of the retention released and when is other half of the retention released?
1st half
a) Issue of Practical completion certificate;
b) Issue of Sectional completion certificate – limited to section
c) Partial possession – limited to part Cl. 2.33;
d) Final payment to nominated subcontractors
2nd half
Other one-half release at the issue of Certificate of Making Good
What is the difference between a retention and retention bond?
Retention
Retention is a percentage of the amount certified as due to the contractor on an interim certificate that is retained by the client.
Retention Bond
The client agrees to pay the amounts which would otherwise have been held as retention, but instead a bond is provided to secure the amount that would have been retained. As with retention, the value of the bond will usually reduce after practical completion has been certified.
What is the purpose of a bond?
Bonds protect the client if the Contractor becomes insolvent. For example, if the contractor becomes insolvent, the bonds are directly paid back to the client by the bondsmen.
What are fluctuations? and where is it found in JCT? How many fluctuations are there?
Fluctuations reimburses the contractor for changes in
input prices. Fluctuations are mostly effective when it is a long-term project such as 2-10+ years.
If the fluctuations method has not been mentioned, option A is the default fluctuation method.
Main items need to be considered in interim valuations?
1) Measured works;
2) Preliminaries;
3) Value of variations;
4) Materials on site Cl.4.16.2;
5) Off-site materials and goods – Cl.4.17;
6) Fluctuations – Cl.4.21;
7) Retention – Cl.4.18;
8) Claims – Cl.23
