Final accounts

Claims

Formal claims are less prevalent than previously in the construction industry. This is a direct result both of the Egan Report - Rethinking Construction- and the ethos of partnering.

If a claim is to arise, or seems a possibility, allowance for the cost associated with it must be included in the cost report. Allowance should be made for a significant potential claim only after discussion with the architect in order to ascertain its appropriateness and effect upon the contract.

The word 'claim' elicits a very emotional response in construction. Often, people become defensive with regard to their position on claims, sometimes to the detriment of the project as a whole. For this purpose, claims should be approached and dealt with as a team, with the involvement of the architect, engineer and employer, and not made solely the responsibility of the quantity surveyor. The quantity surveyor, however, will value the claims upon agreement of the issues involved.

It is advisable to consider claims as a separate issue for final account statement purposes.

Dayworks

Dayworks are used to value and agree works (such as architect's instructions - AIs - and so on), which cannot be valued by other means. Dayworks are, in effect, a timesheet signed by the clerk of works or the architect to verify that the items stated are the actual hours worked or the materials and plant utilised.

The RICS Definition of Prime Cost of Daywork Carried Out Under a Building Contractis used for establishing the appropriate rate. This is usually subject to an adjustment, a percentage addition to the daywork sheet. The percentage adjustment includes an element of profit and overheads on the prime cost (dayworks).

For final account purposes, a schedule of dayworks will be maintained and referenced against the relevant AI.

Fluctuations

Generally, construction contracts are now fixed-priced for the duration of the contract, with the contractor allowing for price increases in labour or materials or plant (and so on) in his or her tender. The risk for such increases lies with the contractor.

On larger construction projects, that will take a number of years to complete, fluctuations may apply.

Indices such as the DTI Price Adjustment Formula indices (previously the NEDO indices) are used to agree price increases due to inflation.

Value added tax

The final account shall be exclusive of value added tax (VAT), unless the contract directs otherwise. Generally, the contract sum will also be net of VAT.

Internal audit of the final account

For best practice, it is recommended that an internal audit of the final account is undertaken on completion.