PRM SEM 01 - 15. Progress Payments Flashcards
Progress Payments Timetable
The target date for completion, the end of the Contract Period may have been adjusted by Extensions of Time the Contractor claims in writing (and the Architect grants) eg weather, variations, problems beyond the Contractor’s control etc.
Remember 11.5.4.(b): When considering an application for extension of time, the Architect is not allowed to take into account whether the Contractor can make up lost time by using more resources (see lecture 16 Contract Administration Section 11: Time for Completion)
How often is a contractor entitled to submit for a payment claim?
“The Contractor is entitled to submit a Payment Claim to the Architect once a month … and a copy to the Principal.” (depends on the contract)
What does the Payment claim to the Architect state?
It must state the basis on which the claim was calculated, such as the value of work done, materials delivered to site but unfixed, materials off site (if allowed by the Schedule / Specific Conditions) etc in such a way as to allow the Architect to assess it.
How long does an architect have to process a payment claim?
The Architect must (within 5 working days) assess the claim, deduct Retentions, deduct any amount they consider not to be reasonable (and give reasons), then issue a Certificate to the Principal called a provisional Payment Schedule. If a Quantity Surveyor has been involved in the project it is wise to have them analyse the claim.
Remember the Architect has a role to handle this process “impartially”.
How long does the Principal have to notify the architect of any amendments the Provisional Payment Schedule?
The Principal can assess this in 3 working days and notify the Architect of any amendments (and give reasons).
How long does the architect have to finish processing the original claim?
No later than 10 working days since the original claim the architect must issue a Payment Schedule and give reasons for any amendments or deductions.
How long does the Principal have to pay the Payment Schedule?
The Principal must pay this (including gst) within 7 working days or become liable for interest.
Note that these payments can be amended by later Payment Schedules eg if the Contractor
was under or over paid.
What does payment not constitute?
Also note that these payments don’t constitute acceptance of the building works or their quality.
What are retentions? Section 14 SSC
“The Principal is entitled to retain an amount to ensure performance and to cover liability for any
defects. This amount is stated in the Specific Conditions”.
What are the usual percentages of Retentions?
Usually this is:
10% of the first $200,000 plus
5% of the next $800,000 plus
1. 75% of anything over $1 million to a maximum of $200, 000.
40% of Retentions are payable on practical Completion.
(In comparison the NZS 3910 contract releases 50% on Practical Completion.)
The Contractor can require this be secured in a trust account or other manner.
The NZIA SCC Section 14.11 does allow a bonus for early completion if previously agreed or a
bond instead of Retentions (see Section 3).
What to do if a sub-contractor comes looking for payment?
Occasionally the architect might be approached by a sub-contractor seeking payment due to an argument with the Contractor. This is none of our business and all we can do is refer them to the Construction Contracts Act 2002 which aims to “facilitate regular payments between parties”, “the speedy resolution of disputes” and “provide remedies for the recovery of payments”. It’s mainly aimed at contractors and sub-contractors.
Section 16: Suspending Work and Ending the Contract
The Contractor may give notice of an intention to suspend work after 5 days if unpaid, and if still
unpaid after 10 days, end the Contract!
The Architect may under certain circumstances suspend the Contract.
The Principal may end the Contract if the Contractor dies, becomes insolvent or fails to carry out
obligations.
The Contractor may end the Contract if the Principal dies, becomes insolvent or fails to carry out
obligations.
If both parties agree the Contract is Frustrated, the Contract may be ended.
Before taking action in this area the Architect should take expert or legal advice!
Section 17: Disputes:
Disputes are addressed generally in the lecture Contract Law.
This section lays out a procedure to attempt dispute resolution through mediation, followed by arbitration. However the Construction Contracts Act 2002 allows this process to be superseded by adjudication if the dispute relates to payment.
Note that if a Contractor advises the Architect of Notice of a Dispute, that does not entitle them to stop work, unless the Architect directs.
Disputes generally relate to payment or interpretation of the Contract Documents. The Architect is required to be impartial even if they are responsible for the problem eg through inadequate drawings.
