Module 7 Overview
© GettyImages
We've looked at types of events and their documentation that increase or
decrease the original contract value (fluctuations, extensions of
time, monetary allowances and variations).
This module covers the preparing progress claims on a project from the
beginning of the contract to the submission of the final claim. At various
stages throughout the project there will be variations, fluctuations, monetary
allowances and extension of time claims to incorporate into the
progress claims. At the end of the works a final claim will need to be
prepared as well.
Fact sheets: Introduction
Fact sheet 7.1: How to present progress claim 1
This fact sheet looks at the documentation that is required to prepare
progress claim 1. Because this is the first claim in the contract, only a small
amount of work has been done on site. There is a no cost variation and an
extension of time claim as well. You will still be required to review and certify
the amount of work completed on site.
Fact sheet 7.2: How to present progress claim 2
This fact sheet looks at the documentation required to prepare progress
claim 2. As the building progresses there is more work to be reviewed and
certified, on and off-site materials are now included in the claim. Fluctuations
will be made on this claim.
Fact sheet 7.3: How to present progress claim 3
This fact sheet looks at the documentation that is required to prepare
progress claim 3. In this claim there have been variations issued by the
engineer, an extension of time, and monetary allowances adjustments.
There are also on-site materials. Fluctuations will be made on this claim.
Fact sheet 7.4: How to present progress claim 4
This fact sheet looks at the documentation that is required to prepare
progress claim 4. The building works are fully underway. There are also
more variations for on-site materials to consider. Fluctuations will be made
on this claim.
Fact sheet 7.5: How to present progress claim 5
This fact sheet looks at the documentation that is required to prepare
progress claim 5. This claim is based completely on progress on site. There
are also more variations for on-site materials to consider. Fluctuations will be
made on this claim.
Fact sheet 7.6: The final claim
This fact sheet looks at all of the documents required to prepare, present and
agree the final claim. The final claim is a special claim in that it is the final
opportunity to claim for everything that has been constructed on site. There
should be no surprises when presenting the final claim, all variations should
have been previously notified, priced and submitted, even if the values have
not been agreed.
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CON103 Contract Administration for Valuing Building Works : Contents : 7.
Project 'Mr & Mrs Smith' : Fact sheet 7.1: How to present progress - Claim
1 : Fact sheet 7.1: How to present progress claim 1
1m
Fact sheet 7.1: How to present progress
claim 1
The project
Fig 7.1 The Project: A house extension
© The Open Polytechnic of New Zealand Ltd
This module uses a house extension project to illustrate progress claims.
Here is the project scope for the construction.
The existing house in Remuera, Auckland is a three-bedroom house built in
the early 1970s on a north facing slope. The clients want to extend the front of
the house to create a large living area with a new entry at the drive-in level
below. They also want to add a main bedroom extension to the back of the
house that will include a new bathroom and dressing room.
The existing bathroom and laundry will be remodelled to make room for a new
hall to the main bedroom. The existing kitchen/dining/living area will be
completely remodelled to make way for a new kitchen/dining area.
The construction period is 5 months commencing on the 4th of March 2019
with the practical completion being the 31st of July 2019. The contract is the
standard NZS 3910:2013 Conditions of Contract and Fluctuations under
‘Appendix A’ are allowed. Note your tender was submitted on the 4th of
February 2019.
Please refer to Appendix 1.0 for the priced schedule of quantities for this
contract.
Claim #1
Fig. 7.2 The site at the start of the contract
© The Open Polytechnic of New Zealand Ltd
In the period for this claim you have taken possession of the site and
established the site ready for construction, including delivery and
connections for the sheds and toilets.
Documents for assessing progress claim value
Programme
Figure 7.2 is what the site looked like at the start of the contract. The
construction programme for the period in which you are claiming allowed for
the existing trees and the front entry steps to be removed, so the
excavations could start. The programme can give you a point of reference of
what you could expect to see on site.
Subcontractor claims
You should have received all your subcontractor claims a few days before
the date the main contractor’s claim is due (typically five working days
before, as per the main contractor to subcontractor contract). Check that you
have received a claim from each of the subcontractors who have started
work during the claim period. Remember that the subcontractors have to
anticipate the work that will be completed between the date they submit their
claim and the date you prepare the client claim.
Schedule of quantities
This contract is subject to a schedule of quantities, so the progress claim will
be prepared on a percentage complete assessment. This is calculated
against each line item of the schedule, which will provide the total value for
each trade to be inserted into the progress claims. The preliminary and
general (P&G) costs will need to be prepared for the entire length of the
project before the first progress claim is prepared. The values are taken from
the SOQ. Each month the percentage calculated from your P&G
spreadsheet can be entered into the relevant % complete column within the
SOQ. These will in turn be inserted into the progress claim. You would
normally attach a copy of the schedule, with your assessment, to your claim
summary.
Site manager’s daily site report
Your site manager will keep extensive records of the activities that have
occurred each day on the construction site. This will include weather, trades
on site, plant on site, visitors to site and any unusual events. Checking these
records and having a catch-up with your site manager is good practice.
Checking progress
You have been to the site to check progress and to take notes for when you
prepare your claim. Occasionally the client might meet with you on site to
discuss and agree what is being claimed first, but it is more common that this
occurs after you have submitted your claim.
From your visit to the site, you notice that all the excavations and site
preparation are completed. On your schedule of quantities, you can list these
as 100% complete.
You then need to consider what else needs to be included in your claim. Go
through the list below.






Preliminary & general (P&G) costs. This should be claimed in every
claim, as this is the project overhead and is independent of progress
on site. For the P&G summary template (that has the lump sum and
time-related split prepared, refer to Appendix 2.0. The P&G section is
the first section within the SOQ. This forms the basis for the P&G
summary.
On-site and off-site materials. For progress claim 1, there are no
materials stored on or off-site.
Monetary allowances. There has been no instruction to spend
any monetary allowances, so there is nothing to be included in the first
claim.
Variation 1 has been issued but is a no cost item Appendix 3.1, so
there is nothing to be included in the first claim. For clarity, we enter
the details of variations into a variation summary Appendix 4.1.
Extensions of time. There has been a claim for an EOT, for flooding to
excavations, see Appendix 5.1.
Fluctuations. As this claim is being made in the same quarter as
the tender was submitted, fluctuations will not apply.
Once all the information above is collected, you can prepare your progress
claim. Remember you will need to prepare your P&G cashflow for the entire
project prior preparing progress claim No. 1.
Note: It is important that the amounts from your various spreadsheets (P&G,
SOQ, Progress claim, Variation summary and Materials On/Off-Site
summaries etc) match when transferring figures from one spreadsheet to
another. If you have a variation summary totalling $22,100.35 that you are
claiming for the month, then the variation total in your progress claim needs
to be $22,100.35 as well. Always check that your totals match.
We will now take you through the steps in completing the claim.
Step 1: P&G costs for claim 1
Now we will look at how to calculate the P&G value.
Assessing the P&G costs is generally only needed to be completed once.
Within your spreadsheet you can work out the amounts for each month.
When that months’ progress claim is really to be prepared, you just need to
transfer that value into the SOQ and then the progress claim.
The P&G is made up of lump sum and time-related costs. The lump sum
costs that have been incurred in this claim period can be claimed, and a
percentage of the time-related costs can be calculated and claimed now as
well.
The P&G costs for claim 1 is as per Fig 7.3 below.
Fig. 7.3 P&G costs for claim 1
© The Open Polytechnic of New Zealand Ltd
The amount we transfer over to the SOQ (and then progress claim 1) is
$19,880.00. This combines the lump sum and the appropriate time-related
costs.
Step 2: Valuing work done - Claim 1
If you need a refresher about this, we recommend taking a look at Fact sheet
2.3.
Following your site visit to assess the construction progress, you noted that
all the excavations are completed. On your schedule of quantities, you can
list these as 100% complete on the original blank schedule of quantities
in Appendix 1.0 that will then look like the schedule in the Fig. 7.4 below.
Note a number of rows have been hidden for clarity.
Fig. 7.4 Schedule of quantities updated for progress claim 1
© The Open Polytechnic of New Zealand Ltd
Note that the P&G total in the SOQ matches that from the P&G spreadsheet.
Step 3: Completed progress - claim 1
You will then transfer these trade totals to the relevant trade within your
progress claim summary page. The result will then look like Fig. 7.5 below.
Fig. 7.5 Completed progress claim 1
© The Open Polytechnic of New Zealand Ltd
This gives us the total amount of work completed by the trades on site to the
end of the period for your first progress claim (claim 1). Notice that the
values in this claim (at the Total Tender Value) match the SOQ values.
Fact sheet 7.2: How to present progress Claim 2
This fact sheet looks at the documentation required to prepare progress
claim 2. As the building progresses, there is more work to be reviewed and
certified and on-site and off-site materials, along with fluctuations, are now
included in the claim.
At the beginning of this month the scaffolding was erected. A full months
hireage can be claimed as well.
In this period, the following progress has been made. All the concrete has
been completed along with 95% of the blockwork and 75% of the timber wall
framing. The electrical first fix is complete as well (items a, b, c, d, e and i)
from the SOQ.
For this claim we have received a claim from our structural steel
subcontractor stating that all the steel (apart from the cleats and braces) has
been fabricated and is ready to be delivered to site for installation. We know
that fabricated steel equates to about 90% of the overall value of the rate, so
we can claim this amount.
The windows are on site. We can claim these as well. We know that
fabricated windows equate to about 90% of the overall value of the rate as
well.
Fluctuations. As this claim is being made in a new quarter, we can claim
fluctuations.
This is what the site looks like when you visit to check the work on site for
the claim.
Fig. 7.6 House site at time of visit to check progress for claim 2
© The Open Polytechnic of New Zealand Ltd
We will next take you through the steps in completing claim 2.
Step 1: P&G costs for claim 2
Firstly, update the SOQ. When we update the SOQ apart from entering the appropriate
percentages against the work items, we need to transfer over the value of the appropriate
amounts from the P&G spreadsheet (claim 2 in this instance).
The P&G costs for claim 1 is as per Fig. 7.7 below.
Fig. 7.7 P&G costs for progress claim 2
© The Open Polytechnic of New Zealand Ltd
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Step 2: Valuing work done to date - claim
2
You will note that only completed items have been updated in the SOQ. This is so there is no
confusion as to what is complete and what is not. It also ties up with the ‘work’ section in our
progress claim. By taking the information we have gathered as to what has been completed this
month, we can update the SOQ.
Once the SOQ has been updated it should look like the example in Fig. 7.8 below. Again, a
number of rows have been hidden for clarity.
Fig. 7.8 Schedule of quantities updated for progress claim 2
© The Open Polytechnic of New Zealand Ltd
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Step 3: Progress - claim 2
The best process to follow when preparing progress claim 2 onwards is to:
1. Open up progress claim 1 and save as progress claim 2.
2. In progress claim 2, in the ‘less Previous Claim’ cell subtract the
amount in the cell above ‘Net Claimable Amount’. This should result in
the cell below ‘Net Claim’ being $0.00. If we don’t have this as zero
before we start entering this months’ amounts, we can get really
confused about the last months’ values.
3. Transfer over the values from the updated SOQ. Note that the work
values ($157,765.97) match in each spreadsheet.
Step 4: Materials On-Off Site for progress
- Claim 2
Assess the value of any on and/or off-site materials and enter these into the claim. Refer to Fact
sheet 2.5
Click hereFact sheet 2.5: How to value onsite and offsite materials
for information on how to deal with on-site and off-site materials. When there are multiple items
to claim, the creation of a separate spreadsheet summary is often desirable. The totals from these
can then be transferred to the progress claim as a single line. In this instance as there is only one
item of each to be claimed these can be entered directly into the progress claim.
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Step 5: Cost fluctuations for progress Claim 2
Apply fluctuations. Refer to Module 4 for information on how to deal with fluctuations. The
fluctuation calculation for claim 2 is shown in Fig. 7.9 below.
This is based on this months’ claim (tendered items only) being $157,765.97 less last months’
claim of $51,780.30.
As we need to collate and present a summary of fluctuations with our final payment claim, now
would be a good time to start this summary. An example is shown in Fig. 7.10 below.
Fluctuations – progress claim 2
Where C = value to add to the claim
V = $105,985.67
L = 1222
L’ = 1216
M = 1208
M’ = 1199
C=V[0.4(L−L′)L′+0.6(M−M′)M′]C=V[0.4(L−L′)L′+0.6(M−M′)M′]
C=105,985.67[0.4(1222−1216)1216+0.6(1208−1199)1199]C=105,985.6
7[0.4(1222−1216)1216+0.6(1208−1199)1199]
C=105,985.67[0.4(6)1216+0.6(9)1199]C=105,985.67[0.4(6)1216+0.6(9)1199
]
C=105,985.67[2.41216+5.4)1199]C=105,985.67[2.41216+5.4)1199]
C=105,985.67[0.001974+0.0004504]C=105,985.67[0.001974+0.0004504]
C=105,985.67[0.006478]C=105,985.67[0.006478]
C=686.58C=686.58
Fig. 7.9 Fluctuation calculations for progress claim 2
© The Open Polytechnic of New Zealand Ltd
Fig. 7.10 Fluctuation summary
© The Open Polytechnic of New Zealand Ltd
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Step 6: Completed progress - Claim 2
Once you have transferred all of these, your progress claim 2 will then look
like Fig. 7.11 below.
Fig. 7.11 Completed progress claim 2
© The Open Polytechnic of New Zealand Ltd
Now let us move on to claim 3 which introduces variation claims.
Fact sheet 7.3: How to present progress claim 3
This fact sheet looks at the documentation that is required to prepare
progress claim 3. In this claim there have been variations issued by the
engineer, an extension of time, and monetary allowances adjustments.
Fig. 7.12 The site at this stage of the claim
© The Open Polytechnic of New Zealand Ltd
Carrying on from claim 2, in this period the following trade sections are now
also 100% complete: structural steel, blockwork, roofing, windows, carpentry
and drainage. The wall plasterboard is 100% installed and the ceiling
plasterboard is 65% installed. The plumbing apart from the taps (items i–m)
is 100% complete as well.
The following materials are stored on site:



All the tiles are stored on site. The client chose wall tiles that cost
$57.50 a m² to buy and floor tiles that cost $85.25 m² (assume the
material cost = 65% of the unit rate).
Exterior and interior doors (assume installation to be 35% of the unit
rate).
All taps (assume installation to be 45% of the unit rate).
Both Provisional sums have been adjusted. The subcontractor quotes for
each are:


Solar Hot Water System $13,225.00
Audio Visual System $16,772.00
The Solar Hot Water System is 75% completed and the Audio Visual System
is 20% completed.
At the last moment the client asked for the roof to be changed from 0.40 to
0.55 gauge. This was achieved at an additional cost from our roofer of $4.75
m² for the roof and $2.35 m for the flashing. As this item was on the critical
path and 3 days were lost, we are also claiming a 3-day EOT.
Fluctuations need to be ascertained as well.
Step 1: P&G costs for Claim 3
Firstly, update the SOQ. When we update the SOQ apart from entering the
appropriate percentages against the work items, we need to transfer over the
value of the appropriate amounts from the P&G spreadsheet (claim 3 in this
instance).
The P&G costs for claim 3 is as per Fig. 7.13 below.
Fig. 7.13 P&G costs for progress claim 3
© The Open Polytechnic of New Zealand Ltd
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Step 2: Valuing work done to date - Claim
3
You will note that only completed items have been update in the SOQ. This is
so there is no confusion about what is complete and what is not. It also ties up
with the ‘work’ section in our progress claim.
Once the SOQ has been updated it should look like the example in Fig. 7.14
below.
Fig. 7.14 Schedule of quantities updated for progress claim 3
© The Open Polytechnic of New Zealand Ltd
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Step 3: Progress Claim 3
The best process to follow when preparing progress claim 2 onwards is to:
1. Open up progress claim 2 and save as progress claim 3.
2. In progress claim 3, in the ‘less Previous Claim’ cell subtract the amount
in the cell above ‘Net Claimable Amount’. This should result in the cell
below ‘Net Claim’ being $0.00. If we don’t have this as zero before we
start entering this months’ amounts, we can get really confused as to
the last months’ values.
3. Transfer over the values from the updated SOQ. The values of the work
items match.
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Step 4: Materials On-Off Site for progress
- Claim 3
Assess the value of any on and/or off-site materials and enter these into the
claim. As there is more than one on-site material being claimed, create an OnSite Material Summary, refer to Fig. 7.15 below. Transferring this total over is
preferable as this lets the progress claim not get too crowded. As the
structural steel and windows are now installed, these are no longer claimed as
on-off-site materials.
Fig. 7.15 On-Site material summary for progress claim 3
© The Open Polytechnic of New Zealand Ltd
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Step 5: Adjusting Monetary Allowances
and assessing variation and EOT claims
for progress - Claim 3
Ideally all monetary allowances, variations and EOT claims will be agreed with
the engineer before you start compiling your progress claim. Progress claim
preparation is a fairly lengthy process and we have limited time to produce it.
Anything (such as variations and EOT claims) that can be agreed before you
start preparing the progress claim means that these agreed amounts just
need to be entered into your claim. It also means that when you claim for the
months’ work, you are much more certain as to the value the engineer will
agree to.
Monetary Allowances
Both PC Sums and both provisional sums have been submitted to the
engineer and agreed. We would in practice already know what the new
amounts are, but for this scenario we are assuming we are presenting these
for approval by the engineer.
Let’s start with the PC Sums for the tiles. The tiler who is already engaged on
the project has supplied us with the cost so we can assume that their margin
is in their quoted price. The cost of the wall tiles is $57.50 a m² and the floor
tiles are $85.25 m². So, we need to determine what the varied value is going
to be. The agreed O/H and margin % for variations is 12.5%.
Assess the value of any variations. As with the Material Summary (Fig. 7.15),
by creating a Variation Summary we can just transfer over the total to the
progress claim. Refer to Fig. 7.16 below.
Fig. 7.16 Variation summary for progress claim 3
© The Open Polytechnic of New Zealand Ltd
As a sample, Figs 7.17 – 7.19 below show how variation claims 2, 4 and 6 are
presented. The other claims are prepared similarly.
Fig. 7.17 Variation 2 – PC adjustment
© The Open Polytechnic of New Zealand Ltd
Fig. 7.18 Variation 4 – Provisional Sum adjustment
© The Open Polytechnic of New Zealand Ltd
Fig. 7.19 Variation 6 – General variation adjustment
© The Open Polytechnic of New Zealand Ltd
Step 6: Test your knowledge on extension
of time
ACTIVITY
You will note that item 7 within the variation summary (Fig. 7.16) is blank. Why
is this? Should it be blank? To submit a claim for an Extension of Time we
need to ascertain what the ‘Working Day’ rate is. This is usually an amount
that is inserted into the Special Conditions of Contract [9.3.11] before the
contract is signed. Again, as with the working day rate we know the number of
working days and these are inserted in [10.2.1].
1. What is the number of working days on this project?
2. What is the working day rate?
Activity. Rich Text Editor.
Tiep Mai - 4 minutes ago
Variation can left blank in the progress payment claim because the day rate
has not been determined.
1. We know that the start date is 4 March 2019 and that the completion
date is 31 July 2019. This is 22 weeks. So, are there 110 working days
(22 x 5)? No, there are only 104. This is because the 4th of March is a
Monday and the 31st of July is a Wednesday. Therefore, we need to
subtract two days straight away. Then there are four public holidays
within this period also (Good Friday, Easter Monday, ANZAC Day and
Queen’s Birthday). As public holidays do not form a part of the ‘working
day’, these need to be taken away too.
2. Now that we know the number of working days, we can calculate the
working day rate by dividing the number of days (104) by the total of the
time-related cost ($54,650.00) from our P&G summary. So, the working
day rate is $525.48 ($54,650.00 ÷ 104).
3. To this we need to apply the margin, which is 12.5%.
So, after all this, the working day rate is $591.17 (525.48 x 12.5%).
When this amount is included, the variation summary now looks like Fig. 7.20
below.
Figure 7.20 Revised variation summary for progress claim 3
© The Open Polytechnic of New Zealand
Got that, thanks!
Step 7: Test your knowledge on
fluctuations
ACTIVITY
The last thing to do for progress claim 3 is to determine the value of
fluctuations. Refer to Fact sheet 4.4 and Fact sheet 4.5 on how to calculate
fluctuations
Click hereFact sheet 4.4: How to calculate fluctuations
Click hereFact sheet 4.5: How to prepare and present fluctuations in cost
Fluctuations are based on the difference in labour and material costs from the
date of tender to the date of the claim. The tender period was in February
2019 and this claim is in May 2019.
This progress claim value is $362,582.06 and the last claims value was
$157,765.97
Labour cost index. Private Sector: Industry Group – Construction: All Salary
and Wage Rates.
June 2019 Index = 1222
March 2019 Index = 1216
Business price index. Inputs: Industry Group – Construction.
June 2019 Index = 1208
March 2019 Index = 1199
Using the formula from the contract:
C=V[0.4(L−L′)L′+0.6(M−M′)M′]C=V[0.4(L−L′)L′+0.6(M−M′)M′]
Determine the fluctuation amount to be added into the claim.
Activity. Rich Text Editor.
Tiep Mai - a minute ago
1,326.68
Fluctuations – progress claim 3
Where C = value to add to the claim
V = $204,816.09
L = 1222
L’ = 1216
M = 1208
M’ = 1199
C=V[0.4(L−L′)L′+0.6(M−M′)M′]C=V[0.4(L−L′)L′+0.6(M−M′)M′]
C=2204,816.09[0.4(1222−1216)1216+0.6(1208−1199)1199]C=2204,8
16.09[0.4(1222−1216)1216+0.6(1208−1199)1199]
C=204,816.09[0.4(6)1216+0.6(9)1199]C=204,816.09[0.4(6)1216+0.6(9)1
199]
C=204,816.09[2.41216+5.4)1199]C=204,816.09[2.41216+5.4)1199]
C=204,816.09[0.001974+0.0004504]C=204,816.09[0.001974+0.0004504]
C=204,816.09[0.006478]C=204,816.09[0.006478]
C=1,326.80C=1,326.80
Well Done. Go to the next step.
Got that, thanks!
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Step 8: Completed progress - Claim 3
When all of the above is transferred to our progress claim 3, it should look like
Fig. 7.21 below.
Fig. 7.21 Completed progress claim 3
© The Open Polytechnic of New Zealand Ltd
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Fact sheet 7.4: How to present progress –
Claim 4
In this period, all the works apart from the exterior painting to ‘other cladding’ – which is yet to
commence, the Fire Services and Siteworks have been completed. There have also been further
variations:


for better quality carpet. The floor coverings subcontractor has confirmed that
the unit rate has increased from $40.00 m² to $53.45 m².
the vehicle crossing to be 250mm thick. The subcontractor has confirmed the
revised cost for this item is $2,572.00.
Neither of the above variations have caused a claim for an extension of time claim and both have
been agreed as claimed.
The bark mulch is stored on site. We estimate that the material cost is 75% of the total cost.
This is what the site looks like when you visit to check the work on site for the claim.
Fig. 7.22 Site at Claim 4 stage
© The Open Polytechnic of New Zealand Ltd
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Step 1: Test your knowledge – preparing
progress - Claim 4
ACTIVITY
Before we can enter amounts into progress claim 4, we need to create it. So
open progress claim 3 and save it as progress claim 4. We then need to get
the amounts ‘Net Claim’ and ‘Amount Claimed gst exclusive’ to equal zero.
Once we have achieved this, we can start entering the amounts for month 4.

From progress claim 3 create progress claim 4 ready for updating.
Fact sheet 7.5: How to present progress –
Claim 5
In this period, all the works are complete. The client has decided however to
undertake the Tar-sealing themselves. This item is to be varied out of the
contract. All other variation works are complete as well. Practical
completion has been awarded and you are commencing on defect
rectification.
This is what the site looks like when you visit to check the work on site for the
claim.
Fig. 7.23 Site at Claim 5 stage
© The Open Polytechnic of New Zealand Ltd
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Fact sheet 7.6: How to present the Final
Claim
The Final Claim
© GettyImages
Progress payments are designed to maintain the cash flow during the
construction project, which is extremely important. The final claim is quite
different. It is the last opportunity to claim for any costs incurred within the
contract not yet claimed. Under NZS 3910:2013 clause 12.4.3, the final claim
provides conclusive evidence that the contractor has no further
outstanding claims against the principal.
In other words, when you submit your final claim, you are saying to
the client ‘This is all the money you owe me and I will not ask for anything
else’.
The purpose of the final claim is to also finalise any outstanding monetary
allowances that didn’t receive any instruction to be spent, to ensure all
variations have been priced and submitted for approval (including any EOT),
and to calculate any remaining fluctuation costs.
The value of your final claim still needs to be reviewed and approved by
the client. If there are differences between the values being claimed and
approved for items such as variations, then these will need to be agreed,
which may result in adjustments and resubmission of the final claim.
Things you have to include
The contract conditions should set out the requirements of the final claim,
and it is important that you follow these carefully.
Under NZS 3910:2013 clause 12.4.2, there is a list of information that must
be shown on the final claim.
Overall, the final claim should follow the same format as your
progress claims for both information shown and the layout of the values
being claimed.
Using clause 12.4.2, write out all the things that your final claim shall include.
What happens after you submit your
Claim
After the final claim is submitted, the engineer will follow the same process in
assessing your final payment claim as they did for assessing your
progress claims.
Final payments under NZS 3910:2013
If there are differences between the final claim values and the engineer's
values, then the engineer is allowed to make amendments. This is normally
done in discussion with the contractor to maintain a good relationship. Both
parties should find common ground in the valuations so the values can be
mutually agreed. There is provision for adjudication and arbitration if
agreement cannot be reached but this should only be used as a last resort.
Because this is a final claim, there is a greater number of working days
allowed for the engineer to carry out their assessment and provide a
final payment schedule. Under NZS 3910:2013, this is a maximum of 35
working days after you have submitted your final payment claim; however,
the engineer needs to issue a provisional final payment schedule to both
the client and contractor within 20 working days. This allows the client the
opportunity to review the final claim in case there is something overlooked by
the engineer. The client has 10 working days to advise the engineer of any
changes.
Once the final payment schedule has been issued the client has 10 working
days to make the final payment to the contractor. There are clauses in most
contract conditions that protect the contractor should the final payment
schedule or payment be late.
In total there is a maximum number of 45 working days between when you
submit your final payment claim, and when the final payment is made by
the client. This is just over two months, which makes it very important for you
to submit your claim within the specified period. If you do not submit a
final payment claim within the due time, the engineer can create the
final payment schedule using their assessment of the total costs.
What does the final payment claim look
like?
The final payment claim will look like the progress claim, except that it must
include the statement 'final payment claim'.
All the P&G and trade values will be at 100% complete. There should be no
values against the on-site and off-site materials. Monetary allowance values
should be adjusted as per their variation submissions and all variations
should be claimed at 100% complete.
The final payment claim will show the claimed amount of the work carried out
on site and will include all outstanding values for variations and fluctuations.
While the fluctuation calculations are done at the time of the claim and
included as supporting documents, the variations should be priced and
submitted separately before the claim is issued, so the engineer has time to
review and approve the variations.
Schedule of quantities
If a schedule of quantities is included in the contract then it forms the basis
of the quantities for your tender submission. By the time you submit your
final claim, the building work is completed. If the contract allows for
remeasuring then this should have been done progressively throughout the
project and any changes in quantities submitted as variation claims.
It is pointless advising the engineer of a remeasure of materials that can no
longer be verified; for example, if the timber framing is now hidden by the
wall linings.
If your contract does not allow for remeasuring of the project, then the
schedule of quantities is a document that you have only used for assessing
your progress claims.
Preliminaries and general (P&G)
The preliminaries and general (P&G) should also be completed by the time
you submit your final claim.
All equipment, plant and sheds will have been off-hired and removed.
Insurances and bonds will have cancelled and although there may remain a
small amount of P&G for the administration of the contract, you would still
claim 100% of this overhead.
The final claim is used to tidy up any outstanding costs related to the P&G.
Often, 100% of the P&G is claimed in the last progress claim.
On-site and off-site materials
There will be no on-site or off-site materials as the project is complete.
If some reason your claim still includes for on-site or off-site materials, there
is a mistake somewhere. The purpose of the final claim is to say that the
contract is completed (with the exception of the defects liability period). The
inclusion of on-site or off-site materials would imply that the construction
hasn't been finished.
Monetary allowances
The purpose of the monetary allowances is to allow for scope that has not
yet been designed, or to allow the final selection of materials or products
after the tender closing date. During the course of the contract these sums
will have been instructed as design and selections were finalised, and the
difference between the sums allowed and the actual costs would have been
submitted as a variation.
At the time of your final payment claim, if there has been no instruction
issued for spending one of the monetary allowances, then the valuation
should be credited under a variation submission. The submission should
note that the sum was not spent.
Variations
It can take some time for all the variations to be priced so they can be
included in a claim. If a variation has not been priced and submitted, you
may be unable to claim the costs in your progress claim. It is good practice
to include an estimates column in your variation summary, and for you to
include an estimated value against any variations that have not yet been fully
priced and submitted. This provides the client with a heads-up of costs to
come and will assist with their budget management.
It is important that variations are priced and claimed as the contract
progresses. However, it is quite possible that the final claim will be due with
variations still to be prepared and submitted to the engineer for approval.
Unless there is an agreement with the client to negotiate the final contract
value, the final claim will not be able to be submitted until all the variations
have been priced.
Before starting to prepare the final claim, ensure that you have received all
the variation claims from your subcontractors. If they are not in your final
claim, and the subcontractor is entitled to the variation, the payment to the
subcontractor will come from your margin. The date in your contract with
your suppliers and subcontractors for submission of final claims must
support the date that your final claim to the client is due.
Extensions of time
The P&G costs associated with any approved extensions of time will have
been submitted as variations.
An extension of time is granted when there is a delay to the completion date
of the project that was outside of the control of the contractor. This prevents
the contractor from being charged for any liquidated damages.
For example, in the project used in this module, an extension of three days
was notified and approved to cover the delays due to the roofing change.
This means that the project completion date has been extended by three
days, and as long as the project is completed within the revised timeframe
then no liquidated damages will apply.
Fluctuations
As fluctuation are claimed on a month by month basis throughout the project,
we need to, as per clause 12.8.2, prepare a separate summary noting the
total paid and submit this with the final payment claim.
Claims previously paid
The final claim is the same as your progress claims.
The gross value is the total of all monies claimed; gross value less retentions
gives you the net claim. You then deduct the value of monies previously paid.
The difference is the value being claimed for payment in that specific claim.
For the final claim, this value will be the final amount the client has to pay for
the project. The actual value paid will be less the value of any retentions held
until the end of the defects liability period.
Liquidated damages
Some contracts allow for penalties for late completion; the cost of the
penalties is called liquidated damages (LD). Within the contract conditions
will be a value for LD and the frequency at which the rate is applied. The rate
is an assessment of the expected actual costs that the client would incur if
the project was delivered after the agreed completion date.
The application of the rate is normally working days or calendar days, or per
week. The rate is an assessment of the expected actual costs that
the client would incur if the project was delivered after the agreed completion
date.
Liquidated damages can be deducted from your final claim.
Retentions
Retentions are a percentage value deducted from the progress claims.
Legislation requires this money to be held in trust accounts.
Retentions are held as a guarantee against performance. The client deducts
retentions from the main contractor, and the main contractor deducts
retentions from the subcontractors.
The contract conditions will stipulate whether retentions are required on the
project and the percentage value to be deducted. Retentions are typically
either a flat rate of 10% to a maximum of $200,000, or a reducing scale rate of
10% for the first $200,000, then 5% on the next $800,000 and then 1.75% for
over $1 million, but with a maximum of $200,000 withheld.
After practical completion, 50% of the value of the retention held is typically
returned. The balance of the retention is held until the end of the defects
liability period.
The progress claim submitted after practical completion should include for the
partial release of the retentions.
The balance of the retention value being held from practical completion until
the end of the defects liability period may be adjusted in the final claim if the
gross claim value changes (up or down) from the last progress claim to the
final claim.