Valuations

Construction contracts are generally for a defined period of time and, in certain circumstances, for a duration of a number of years. The contractor will require monies during the course of the works in order to remain financially secure.

The contract therefore requires a valuation to be made for the purpose of ascertaining the amount due in an interim certificate from the employer to the contractor.

These notes are based on the JCT Design and Build Contract 2016. The general rules apply equally to other forms of contract. It is prudent for the project surveyor to review the specific contract prior to undertaking the first valuation. JCTDB 2016, and other contracts, are available from the RICS Shop.

Clause 4.7.1 states that:

'... Interim Payments shall be made by the Employer to the Contractor ...'

and clause 4.9.1 states:

'... the final date for payment  of an Interim Certificate shall be 14 days from  its due date.

(© Reproduced with kind permission of JCT)

Employers may, and often do, amend this 14-day period to honour certificates, due to internal procedures with regard to the processing of valuations and cheques within the finance department.

When setting up the contract, it may prove beneficial to liaise with the employer with regard to the timing of valuations. These may need to be back-to-back with financing arrangements. Alternatively, the contract may require certificates to be issued at particular work stages.

It is normal practice for both the private quantity surveyor (PQS) and the contractor's surveyor to undertake and complete the valuation following a site visit. Valuations offer an ideal opportunity to develop the final account by allowing both surveyors to record site measurements and agree rates.

Valuations take into account the following:

• work properly executed;
• materials on site;
• fluctuations in labour and material costs (if applicable).

Valuations may also include for materials stored off-site. Generally, employers are reluctant to include monies for such items, as they can be stored many miles from site and are obviously outside the employer's direct control. However, in certain circumstances employers are willing to include monies for such items, and this is dealt with separately.

Bear in mind that the valuation prepared by a quantity surveyor is a recommendation of the value of works completed. The interim certificate issued by the architect is the legally binding amount to be paid. As such, the architect's interim certificate is legally enforceable under the contract. The value of the interim certificate is not a final agreed payment for the work, but it is an account payment, and may assist in the forecasting of final costs and the final account.