Preparing the final account
The final account should be at the forefront of the decision-making process once the budget has been signed off. The process should be started as soon as the project moves from the cost plan phase into tender preparation stage.
The decisions that the design team make with regards to procurement strategy, contract format, contractor selection and contract programme will inform the structure and content of the final account. Therefore, the final account process should always be at the forefront of the contract administrator/surveyor's decision-making processes right from the outset and be an integral element of the advice given to the client and the design team.
What is the final account?
The final account is the 'document' that brings together all the financial aspects of the contract, such that it is an agreed, fair valuation of the works properly undertaken by the building contractor.
Having stated quite firmly that the final account compilation begins before the contract is placed, the reality is that the 'adjustment of the contract sum' can only commence in earnest once the contract has been let. Once the contractor is appointed the contract administrator/surveyor needs to set out the processes that will be followed to build the account.
Many contract forms have their own individual clauses relating to the final account. They are similar however and are constructed from the following elements:
- the original contract sum;
- any omissions of provisional sums and provisional work and any adjustments against these sums;
- all additions and omissions as a result of varied work properly instructed by the contract administrator;
- all additions and omissions as a result of the issue by the contract administrator of revised drawings and/or specifications resulting in agreed re-measures of quantities; and
- the addition of money due as a result of loss and/or expense incurred due to the granting of extensions of time.
A simple example of a generic account is shown below, assuming the project was placed using drawings and specifications:
Generic final account
|
Item |
Omit |
Add |
|
|
1) Original contract sum |
|
50,000.00 |
|
|
|
|
|
|
|
2) Provisional sum account |
|
|
|
|
|
a) Omit general contingency provisional sum |
2,500.00 |
|
|
|
b) Omit daywork provisional sum |
1,500.00 |
|
|
|
c) Add signed and correctly verified daywork sheets |
|
1,000.00 |
|
|
|
|
|
|
3) Contract administrator instruction account |
|
|
|
|
|
a) Omit hardwood veneered doors with yacht varnish finish |
3,000.00 |
|
|
|
b) Add plywood, painted flush doors |
|
1,500.00 |
|
|
c) Add extra washbasin into the en-suite bathroom with associated plumbing work |
|
900.00 |
|
|
|
|
|
|
4) Revised drawings account |
|
|
|
|
|
a) Omit drainage as shown, specified and priced in tender |
2,000.00 |
|
|
|
b) Add drainage as now shown on revised external works drawings as measured and valued by the quantity surveyor and agreed with contractor |
|
2,750.00 |
|
|
c) Omit boundary fencing to front garden as drawn, specified and priced in tender |
1,250.00 |
|
|
|
d) Add boundary wall in facing bricks on concrete strip foundation all as shown on revised landscaping drawings. Measured, valued and agreed with contractor |
|
6,000.00 |
|
|
10,250.00 |
62,150.00 |
|
|
|
|
(10,250.00) |
|
|
Basic measured account |
|
51,900.00 |
|
|
5) Loss and/or expense |
|
|
|
|
|
Add for the agreed cost of extending the programme as a result of varied works to the drains and boundary wall. Costs as proven by the contractor and agreed by the quantity surveyor and contract administrator as properly incurred for the 2 weeks extension granted |
|
3,000.00 |
|
|
TOTAL OF AGREED ACCOUNT |
£ |
54,900.00 |
Figure 1: simple account summary illustrating how a final account is constructed
Best practice would require that each section is prepared as a separate detailed account with the resultant totals brought forward to this final summary. With a simple contract with few variations it is quite acceptable to keep the accounting process equally simple and accordingly an account as shown above is generally a document that can be agreed between the contract administrator and the contractor.
The construction of an account in this ordered fashion becomes even more important as projects become larger and more complex. For example, there maybe in excess of 100 formal instructions that vary the work any number of new and/or revised drawings may be issued that will require the quantity surveyor and the contractor to re-measure and re-value all amended or new work. Therefore, in these situations, each section of the final account has to stand the full test of audit and needs to be clearly structured to prove that a fair valuation of the works properly executed is undertaken.