Other things to consider when preparing a final account

Over recent years there has been an increasing emphasis on the use of framework agreements for the appointment of contractors. They are also useful for consultants.

One of the key reasons behind the increasing use of frameworks is the costs and the delays associated with complying with EU procurement rules for public sector works. The use of a 5-year framework, for example, avoids these costs and delays. The framework is set up using the EU procurement rules and can be used for any future projects to procure the works rather than having to go back through the entire OJEU procedure again.

Framework agreement will provide a mechanism for the surveyor to assess which of the companies on the framework are suitable for their project. It may be that 3 companies are ideally suited and therefore a mini-competition can be undertaken. Each firm would submit a 2-stage price for the works while still using their fixed preliminary rates and agreed mark-up of sub-contractor costs.

Be aware:

• The percentage mark-up on sub-contract package prices should be NET of all discounts such that any discounts offered accrue to the client and not the contractor.
• Check to see what has NOT been priced in the preliminaries section as you will have to pick up those costs in the final account. For example, scaffold, skips, cleaning, transport, etc. All of these could be considered either as preliminary costs or package costs. Check to see where your contractor expects to recover these costs.
• Consider the effects of programme and how any time related costs will increase the value of the final account.

Framework accounts

The structure of any contract that has been procured under a framework agreement can be based upon any available contract. That is, unless the original agreement states how any works are to be contracted.

Framework agreements are not usually prescriptive on the contract used. This means that if we use the JCT Suite of contracts as an example, then all options are available including Minor Works, Design and Build, Standard Form with/without quantities and Prime Cost contract.

The negotiation and settlement of the final account will need to comply with the conditions of contract upon which the project has been based.

‘Framework accounts’ for the use of a prime cost contract based upon the 2-stage method of procurement.

Case study: Prime cost final account negotiation

The framework contract procurement route utilised the Prime cost form of contract. The contract was let on the basis of a 2-stage procurement using a mini-competition where ‘best value’ was secured against preliminary costs, percentage mark-up on net sub-contract prices plus programme and quality submissions.

The final account must therefore still follow the basic guidelines. With this type of Prime cost contract the surveyor would need to measure, value and agree the final account in close collaboration with the principal contractor and the individual sub-contractors. The end result will be a summary of a number of individual trade package accounts all separately negotiated and agreed, together with the principal contractor’s preliminaries costs plus the percentage mark-up total on the net accounts.

There can be certain minor variations to this process, for example, instead of a percentage mark-up the contractor, surveyor and client may agree a lump sum overhead and profit recovery. This ring fences the contractor’s recovery and provides a degree of certainty for the client as it removes the open-ended adjustment to sub-contractors’ accounts. These are however only minor adjustments to the overall process, which is generally consistent and requires the surveyor to negotiate the settlement of all trade package contractors as the work progresses. These trade package accounts, together with the principal contractor’s tendered preliminaries and on-costs, inform the overall final account.