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Last edited 12 Dec 2017
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Valuation of interim payments
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(/wiki/The_Housing_Grants,_Construction_and_Regeneration_Act) stipulates that interim or
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stage payments (/wiki/Payment) are due to any party to a construction contract
(/wiki/Construction_contract) that has a duration of more than 45 days. Therefore, almost all
constructions contain provisions for interim payments (/wiki/Interim_payment).
Contracts (/wiki/Contract) should also include clauses that detail:
The valuation (/wiki/Valuation) method.
Criteria under which interim payments (/wiki/Interim_payment) will be made.
Payment (/wiki/Payment) timings.
Administrative rules to which those undertaking the valuation (/wiki/Valuation) should
adhere.
Interim valuation (/wiki/Interim_valuation) is a pre-cursor to the issue of an interim certificate
Commercial management
(/wiki/Commercial_management).
Contract administrator
(/wiki/Contract_administrator).
Construction contract certificates, notices and
instructions
(/wiki/Construction_contract_certificates,_notice
Due date (/wiki/Due_date).
Housing Grants Construction and
R
ti A t
(/wiki/Interim_certificate), which in turn allows an interim payment (/wiki/Interim_payment) to be
made. It is a detailed breakdown, generally prepared by a contractor (/wiki/Contractor), that
constitutes an application for part payment (/wiki/Payment) for work undertaken since the last
valuation (/wiki/Valuation). It is checked and signed off by the client's (/wiki/Client%27s)
contract administrator (/wiki/Contract_administrator) who often delegates the task to a cost
consultant (/wiki/Cost_consultant). This usually involves visiting the site and checking that the
work has been carried out, either by measurement (/wiki/Measurement) or by visual inspection
(/wiki/Inspection).
Interim payments (/wiki/Interim_payment) ease the contractor (/wiki/Contractor)'s cash flow
(/wiki/Cash_flow), on the premise that project finance is cheaper for the client (/wiki/Client) than
it is for individual contractors (/wiki/Contractors).
The basis of the contractor (/wiki/Contractor)'s interim valuation (/wiki/Interim_valuation)
(application for payment (/wiki/Payment)) will vary depending on the type of contract
(/wiki/Type_of_contract) being used. Calculations can be based on:
Activity schedules (/wiki/Activity_schedule) assessed in terms of percentage achieved or
completion (/wiki/Completion) of the activity.
Milestones (/wiki/Milestones) reached on a pre-agreed programme (/wiki/Programme).
Measurement (/wiki/Measurement) against a bill of quantities (/wiki/Bill_of_quantities).
Stage payments (/wiki/Payment) against calendar dates.
Or a combination of the above.
The detailed build up of the valuation (/wiki/Valuation) will show all work and entitlement up to
the date of the interim valuation (/wiki/Interim_valuation) and will comprise:
Works packages (/wiki/Packages). That is, work executed by the contractor
(/wiki/Contractor) that is in full accordance with the contract (/wiki/Contract).
Preliminaries (/wiki/Preliminaries). That is, set up and dismantling costs (/wiki/Cost) (only
incurred once) and running costs (/wiki/Cost) such as insurance (/wiki/Insurance) and
electrical consumption (that will occur regularly), as well as staff and management costs
(/wiki/Cost), overhead and profit (/wiki/Profit) (which can amount to 50% of the overall cost
(/wiki/Cost) of preliminaries (/wiki/Preliminaries)).
Variations (/wiki/Variations). These elements should only be paid after the work has been
undertaken, based on the rules for valuing variations (/wiki/Variations) in the contract
(/wiki/Contract).
Extension of time (/wiki/Extension_of_time) (EOT) and / or loss and expense
(/wiki/Loss_and_expense). Payment (/wiki/Payment) entitlement is only due upon delay
(/wiki/Delay) that is solely caused by the client (/wiki/Client) or items of risk (/wiki/Risk) that
fall to the client (/wiki/Client) (see relevant events (/wiki/Relevant_events) for more
information). Concurrent delay (/wiki/Concurrent_delay) where the contractor
(/wiki/Contractor) has part liability (/wiki/Liability) may lead to an extension of time
(/wiki/Extension_of_time) and relief of liquidated and ascertained damages
(/wiki/Liquidated_and_ascertained_damages) but not entitle the contractor
(/wiki/Contractor) to additional payment (/wiki/Payment).
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Arbitration
(/wiki/Arbitration_in_the_construction_industry)
Special payments (/wiki/Payment) for off-site goods and materials (/wiki/Offsite_goods_and_materials). Such payments (/wiki/Payment) might apply on large items of
manufacture prior to site installation but only when such payment (/wiki/Payment) has been
pre-agreed. Such items might include transformers, chillers (/wiki/Chillers), lifts (/wiki/Lifts),
prefabricated (/wiki/Prefabricated) units or expensive cladding (/wiki/Cladding) systems.
The application must be accompanied by evidential proof (sometimes photographic), or a
factory visit by the client's representative (/wiki/Client%27s_representative), a certificate of
client (/wiki/Client) ownership and appropriate identification labelling on the items of
completed manufacture, stored separately in the factory from other materials
(/wiki/Materials). See Off-site goods and materials (/wiki/Off-site_goods_and_materials) for
more information.
Acceleration (/wiki/Acceleration) costs (/wiki/Cost). Sometimes acceleration
(/wiki/Acceleration) agreements can be negotiated as an addendum to the contract
(/wiki/Contract) in lieu of extensions of time (/wiki/Extensions_of_time) caused by elements
constituting client's (/wiki/Client%27s) risk (/wiki/Risk). Such agreements will stipulate the
payment (/wiki/Payment) provisions.
Provisional sums (/wiki/Provisional_sums). These are the substitution of agreed costs
(/wiki/Cost) for any items in the contract documents (/wiki/Contract_documents) that were
provisional and therefore subject to negotiation and resolution after further and better
particulars were available upon which to fix a price (/wiki/Price).
Adjustment of prime cost sums (/wiki/Prime_cost_sum).
Contractor (/wiki/Contractor)'s design fees (/wiki/Fees).
Costs (/wiki/Cost)/expenses relating to contractor (/wiki/Contractor)'s right of suspension.
Specific adjustments (for advanced payments (/wiki/Advanced_payment), work not
properly executed, fluctuations (/wiki/Fluctuations), retention (/wiki/Retention), and so on).
(/wiki/Arbitration_in_the_construction_industry)
Have a read of our introductory article on
arbitration in the construction industry.
Tackling mental health
(/wiki/Tackling_mental_health_-_6_point_plan)
Certain deductions might be made by the contract administrator (/wiki/Contract_administrator)
when certifying (/wiki/Certifying) the contractor (/wiki/Contractor)'s application for payment
(/wiki/Payment), such as:
Retention (/wiki/Retention). As set out in the contract (/wiki/Contract). Half of this retention
(/wiki/Retention) will be released on certification of practical completion
(/wiki/Practical_completion) and the other half upon issue of the certificate of making good
defects (/wiki/Certificate_of_making_good_defects).
Liquidated and ascertained damages (/wiki/Liquidated_and_ascertained_damages). These
can only be levied after the completion date (/wiki/Completion_date) has expired.
Set off (/wiki/Set_off) costs (/wiki/Cost). The client's (/wiki/Client%27s) right to deduct costs
(/wiki/Cost) it has incurred through the contractor (/wiki/Contractor)'s negligence
(/wiki/Negligence) such as a successful claim by an adjacent property owner for
subsidence (/wiki/Subsidence) due to failure of temporary bracing of a party wall
(/wiki/Party_wall).
Substandard or rejected work. Occasionally a client (/wiki/Client) might agree a reduction in
payment (/wiki/Payment) to reflect diminution of value rather than insisting on replacement.
(/wiki/Tackling_mental_health_-_6_point_plan)
Mind CEO Paul Farmer discusses how
engineering and construction can lead the way
in tackling mental health at work.
V2G technologies (/wiki/Vehicle-togrid_(V2G)_technologies)
The meaning of 'value', in the context of interim valuations (/wiki/Interim_valuation), can be
contested. According to the JCT (/wiki/JCT) Standard Building Contract
(/wiki/Standard_Building_Contract) with Quantities 2011, it refers to the 'total values of work
properly executed by the Contractor (/wiki/Contractor)'. Often the contractor (/wiki/Contractor)'s
position is that they are entitled to payment (/wiki/Payment) for work done at the rates
referenced in the bill of quantities (/wiki/Bill_of_quantities), plus some of the preliminaries
(/wiki/Preliminaries). This is the most common interpretation across the industry.
However, employers (/wiki/Employer) have argued that this is misrepresentative of the actual
(/wiki/Vehicle-to-grid_(V2G)_technologies)
value of the work to them, which is the value of the whole contract (/wiki/Contract) less the cost
(/wiki/Cost) of having to hire another contractor (/wiki/Contractor) if the first contractor
Vehicle-to-grid technologies receive are to
(/wiki/Contractor) failed to complete the works. This is not a commonly accepted position.
receive almost £30 million funding.
The interim valuation (/wiki/Interim_valuation) is for all work completed, not for the work
completed in that period. This means that the certified interim payment (/wiki/Interim_payment)
is calculated by subtracting the the previous valuation (/wiki/Valuation) from the current
Congestion in historic cities
(/wiki/Congestion_in_historic_cities)
valuation (/wiki/Valuation), less any deductions. The resulting total and retention
(/wiki/Retention) figure are then included in the interim certificate (/wiki/Interim_certificate)
issued to the client (/wiki/Client) for payment (/wiki/Payment) by the contract administrator
(/wiki/Contract_administrator).
It is important to assess whether or not, within the terms and conditions
(/wiki/Terms_and_Conditions) of the contract (/wiki/Contract), the anticipated final contract
value (/wiki/CONTRACT_VALUE) will be sufficient to complete the remaining works. Low
valuations (/wiki/Valuation) will place unreasonable financial pressure on the contractor
(/wiki/Contractor), whereas a high valuation (/wiki/Valuation) will create a risk (/wiki/Risk) to the
employer (/wiki/Employer).
NB: The Housing Grants Construction and Regeneration Act
(/wiki/Housing_Grants_Construction_and_Regeneration_Act) sets out statutory procedures for
making and withholding payments (/wiki/Payment) on construction contracts
(/wiki/Congestion_in_historic_cities)
The same area of road can move 4,400 people
an hour by car, 14,400 by bike, or 66,000 by
tram.
(/wiki/Construction_contracts). See Pay less notice (/wiki/Pay_less_notice) and Payment notice
(/wiki/Payment_notice) for more information.
Find out more (/wiki/Find_out_more)
Related articles on Designing Buildings Wiki (/wiki/Designing_Buildings_Wiki)
Imagination Works (/wiki/Imagination_Works)
Commercial management (/wiki/Commercial_management).
Contract administrator (/wiki/Contract_administrator).
Construction contract certificates, notices and instructions
(/wiki/Construction_contract_certificates,_notices_and_instructions).
Due date (/wiki/Due_date).
Housing Grants Construction and Regeneration Act
(/wiki/Housing_Grants_Construction_and_Regeneration_Act).
Interim certificate (/wiki/Interim_certificate).
Off site materials (/wiki/Off_site_materials).
Pay less notice (/wiki/Pay_less_notice).
Payment notice (/wiki/Payment_notice).
Preliminaries (/wiki/Preliminaries).
Provisional sum (/wiki/Provisional_sum).
Relevant event (/wiki/Relevant_event).
Set off (/wiki/Set_off).
(/wiki/Imagination_Works)
Commended for CIAT's Student Award for
Excellence in 2017 - have a look at Imagination
Works.
Share (http://www.sharethis.com/share?publisher=832c94fd-9945-4b2b-b15fFramework contract (/wiki/Framework_contract)
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HS2 and BREEAM (/wiki/HS2_and_BREEAM)
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HS2 becomes the UK’s first infrastructure
project to be awarded a BREEAM Infrastructure
(pilot) Scheme Certificate.
Data as infrastructure
(/wiki/Treating_data_as_part_of_infrastructure)
(/wiki/Treating_data_as_part_of_infrastructure)
ICE have called for data to be treated the same
as physical infrastructure. But what could this
look like?
Battery storage (/wiki/Battery_storage)
(/wiki/Battery_storage)
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in battery storage?
Carillion claims (/wiki/Carillion#Claims)
(/wiki/Carillion#Claims)
Carillion's business case reveals they were
trying to recoup £262m in claims.
Click here to see more Featured articles and
news. (/wiki/Featured_articles_and_news)
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