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5 BTQS3024 (2023) Week3A (Valuation)
5 BTQS3024 (2023) Week3A (Valuation)
(Contract Management)
Week 3(A)
Valuations and Final Account
Sr Ng Chooi Chooi
Semester 3, 2023
• Insight of Valuations
• Type of payment
• Type of contract price
• What is interim certificates
• Valuations in standard forms
• In real life practice
• The main purpose of valuations is to reduce the need for the contractor to
fund the development.
1. Contracts with BQs – paid upon the works described and quantified.
2. Lump Sum Contracts – paid upon the schedule of works.
3. Remeasurement Contracts – paid in full based on the works completed and
quantities actually carried out.
• Contract Sum – the amount of money the employer will pay to the
contractor or other payable amount
• Contract sum defined in Article 2 – Article of Agreement
• Upon receipt of the Application (and FULL DETAILS), the Architect (with
Quantity Surveyor’s Certificate), has a MAXIMUM 21 days to issue a
corresponding INTERIM CERTIFICATE to the EMPLOYER, with a copy to
the Contractor.
a. DIRECT the Contractor as the amounts payable to any of the Nominated Sub-
Contractors and Nominated Suppliers under the Interim Certificate; and
✓ Total Value of Work Properly Executed up to the date of the Payment Application.
+
✓ Materials and goods as delivered to site in the percentage value, up to the date of the
Payment Application , not temporary works and not prematurely delivered.
LESS
✓ The Retention Sum (Clause 30.5).
LESS
✓ Previously certified amount.
• For set-off by the Employer, this is only allowed under Clause 2.4, 4.4,
5.1, 6.5(e), 6.7, 14.4, 15.3(b), 15.3(c), 15.4, 15.5, 19.5 and 20.A.3.
• The Employer’s interest as fund trustee and NO OBLIGATION to invest the money.
a. If the Contractor fails to perform his obligations, ie failure to rectify defects, the
Employer may utilize this fund to pay 3rd party to carry out the defaults works;
If Agree, conclusive
If not, refer to arbitration
6 months 6 months 3 months 3 months
No Dispute
Conclusive+Agreed
• Clause 7 stated the consideration of the works or such other sum become
payable.
• When the total value of work has reach the sum referred to in
Appendix, the S.O. is only obliged to carry out valuation for issuing the
1st interim certificate (Clause 28.1).
• For each subsequent valuation, the S.O. obliged to value the work
property executed, and unfixed materials, provided the value is equal
or more than referred in Appendix (Clause 28.2)
• The S.O. to value works properly executed, reject value the work with
patent defect.
• The S.O. shall issue an Interim Certificate within 14 days from the date
of valuation .
• Provided THAT
1. The Contractor returned the signed Letter of Acceptance;
2. The Contractor has deposited the relevant insurance policies.
• Submission of Claim:
• The Contractor submit the Statement of Work Done to the S.O. at the interval
stated in the Appendix, ie 1 months.
• Payment Bond:
• Article of agreement
• The Terms – item 2
• Clause 58.1 deals with the Contractor’s interim payment application and
timing.
• The Contractor may submit the Interim payment application at the interval
fixed in the appendix, if not stated is monthly.
• By clause 58.2 the Engineer must issue Interim Payment Certificate within
21 days after received the Contractor’s application.
• The Employer must pay the Contractor within the Period of Honouring
Certificate , clause 58.3.
• The Employer is entitled to set-off or deduct from the payment.
• If the Employer fails to pay, a simple interest as additional payment will
add to the certified amount.
• Pursuant to clause 58.4, if the Employer fails to pay full amount, and
continue 14 days after Period of Honouring, the Contractor may serve a
written notice.
• Options for the Contractor:
a) Suspend the works;
b) Reduce the rate of construction.
• In either of the above option, the Contractor is entitled for:
• Extension of time; clause 42.2(1)
• Additional costs; clause 42.2(1)
• Retention Monies
• 10% of retention in certified amount.
• Limit of retention 5% of the Contract Sum.
• Clause 59.1 states, the Contractor must submit proposed final account
within 3 months after Certificate of Making Good Defects.
• The Contractor must substantiate the claim with supporting documents,
quantities, measurement & etc.
• By clause 59.2, the Engineer may issue the final account with 2 months
from the Contractor’s submission.
• The Employer to pay the Contractor the final certified amount within the
Period of Honouring.
• English case law, London Borough of Camden v Thomas Mclnerny & Sons
Ltd (1986) 9 Con LR 99 held that:
• The mere signature of the architect on a certificate does not amount to its
issue.
• The dictionary meaning of “issue” means “to send forth, to give or send
out officially; to put into circulation”.
• Thus, since the certificate was signed and held back, it was not issued and
had no effect.
• LHF commenced legal action to claim for payments for works done prior to
its termination.
• The High Court decided in favour of Usima in relation to termination and
counterclaim.
• The Court of Appeal decided other wise and allowed LHF’s claim.
• The Federal Court allowed LHF’s claims based on the interim certificate
jointly and measured and certified by Usima and JKR.
• The Federal Court held that LHF’s silent on the written notice, allowed
Usiam invoke sub-clause 51(c) to terminate his appointment.
• Lessons Learnt:
- Attention to Contractor
- Certificate Number
- Date of Certificate
Certified work done
for NSCs
Retention Sum
Previously Certified
Amount
― John Lennon