U6 Contract Admin : Payment

Question 1

Explain the procedure for payment using a standard contract form.

Answer 1

More economical for the client to raise capital and to pay the contractor for the value of work’s completed.
Normally with a deduction for retention.
Interim payments based on interim valuations based on the priced contract documents.
Measurement and valuation normally at monthly intervals.
Reasonable accuracy required to avoid Overvaluation or Undervaluation.
Primary purpose to maintain the contractor’s cash flow at a reasonable level.

Question 2

Describe how interim payments are ascertained and why? (9)

Answer 2

The following items are to be considered when valuing work executed.

1 - Preliminaries
2 - Measured works (e.g BoQ)
3 - Value of variations and changes
4 - Subcontractors work
5 - Material On/Off site
6 - Fluctuations (where allowed)
7 - Loss/expense claims
8 - Retention monies
9 - Previous payments

Question 3

Describe how final account is ascertained and why? (6)

Answer 3

Before beginning the measurement and valuation process it is necessary to cross-reference all source documents.
In addition the following items are included:-
1 - CA instructions
2 - Variations/change orders
3 - Minutes site meetings
4 - Daywork sheets
5 - Wage/material re fluctuations
6 - Subcontractors and suppliers accounts

Question 4

Understand the items adjusted in a final account. (10)

Answer 4

Contract Sum
Variations
Adjustment of Prime Cost Sum
Adjustment of Provisional Sum
Adjustment of Provisional Quants
Dayworks
Fluctuations
Omissions
Previous payments

Question 5

Discuss the factors to be considered prior to compiling a claim

Answer 5

For a claim to be successful it must be based on fact, and have their origins in the contract.

Question 6

What three headings can claims be grouped under?

Answer 6

Contractual

• matter based within the terms of the contract but agreement between the parties cannot be reached.

Extra-contractual

• a claim that would be enforceable at law but is not covered within the contract.

Ex gratia
a claim which has no legal foundation but which warrants consideration on the grounds of hardship/moral grounds.

Question 7

Explain the importance of the final certificate?

Answer 7

Always release of final retention sums.

Question 8

Why the importance of regular financial reporting?

Answer 8

Keep the employer aware of the financial status of the contract and the cost consequences of variations before they are undertaken.

Question 9

The problems in the payment process? (3)

Answer 9

Delays in payments from main to subcontractors.
Withholding payments without justification.
Paid when paid provisions

Question 10

What are the basic payment provisions in the UK Construction ACT

Answer 10

All contracts exceeding 45 days duration must include for interim payments.
Give notice 5 days after the due date for the payment specifying the amount.
Pay-less- notice can be issued, seven days.