Valuations Flashcards
Why do construction projects have interim valuations carried out?
Interim valuations are detailed breakdowns that constitute an application for part payment for work undertaken since the last valuation.
Purpose of them is to relieve the contractor of the financial burden of financing the works until completion.
Explain the JCT payment timetable.
Due date is 7 days after the interim valuation date, final day for payment is 14 days after the interim valuation date.
Date is to be agreed by the parties in the contract particulars and is intended to be the same date across all ties of JCT contract on a project.
What items are included in an interim valuation giving a brief description of each.
- preliminaries
- retention
- loss & expense claim
- fluctuations
- materials on/off site
- MC work and variations
- provisional and PC sums
What is the difference between the fluctuation clauses under JCT SBC 16? Why might you recommend a client to use the different fluctuation clauses?
Fluctuation provisions in construction contracts provide a mechanism for dealing with the effects of inflation.
Option A - contributions, levy and tax fluctuations
Option B - labour and materials cost and tax fluctuations
Option C - use of price formula adjustment
They should use a fluctuation clause if it is a large project which could last a few years and prices will change. This will allow for the contractor to be reimbursed for price changes to specified items over the duration of the project (a fluctuating price).
What are the ways in which a contract sum can be adjusted giving examples under JCT SBC 16?
- variations
- fluctuations (price alterations due to inflation)
- loss and expense
- statutory fees
What are the requirements for paying materials on site and off site under JCT SBC 16?
Once items have been delivered to site, ownership passes from the contractor to the client even if payment has not yet been made.
Paying for off site materials can put the client at risk, for example if the contractor becomes insolvent.
What is the difference between a defined provisional sum and an undefined provisional sum?
Defined - those which have been described in detail that the contractor is expected to have made allowance for in their programming, planning and pricing prelims.
Undefined - refers to work which is not completely designed - contractor cannot be expected to make allowance for them. This means that the contractor may be entitled to an extension of time and or additional payments.
What is retention? Why is it used? How is retention treated under JCT 16?
Retention is a % of the amount certified as due to the contractor on an interim certificate, that is deducted from the amount due and retained by the client in case of insolvency.
Purpose is to ensure the works are correctly completed.
Amount of retention must be stated in the contract particulars.
Once practical completion has been certified, the retention % that may be deducted is halved. The employer may continue to deduct half until the certificate of making good is issued.
Statement must be issued stating the amount of retention deducted.
What is payless notice - what are the rules for using one?
If paying party wants to pay less than the notified um then they must serve a pay less notice stating how much it considers to be due and the basis of the assessment.
Rules:
-client to issue notice within 5 days of the date for payment
-notified sum is payable by the final date for payment
-contractor may issue default payment notice if the client fails to issue a payment notice
What is a final account?
Agreed statement of the amount of money to be paid at the end of a building contract from employer to contractor.
What is the effect of a final certificate?
Issued at the end of the defects liability period by CA and indicates that a construction contract has been fully completed.
Releases all remaining money to the contractor, including any remaining retention.
Can you explain how you value preliminaries for an interim valuation under JCT SBC 16?
- set up and dismantling costs
- running costs (e.g. insurance)
- staff and management costs
- overheads and profit
If a project is delayed how do you amend the preliminaries value in the next IV?
Prelims are paid on a % method, therefore can amend accordingly.
