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What is a final account?

2019-11-12T03:53:57Z

Bukhosi Ncube: Protected "What is a final account": For built environment students ([edit=author] (indefinite))

What is a Final Account

In construction contracts, a final account is the agreed statement of the amount of money to be paid at the end of a building contract by the employer (Client) to the contractor (Builder). A final account brings about a sense of finality as taken from its name to the negotiations leading up to the agreement of the Final Account between the parties to the contract.

Who Prepares a Final Account?

Quantity Surveyors prepare final account in the manner that is best suited for the particular project with the original contract sum as the starting point. An important part of the contractor’s quantity surveyor’s work is the agreement of the final account. Under the terms of the contract a professional registered quantity surveyor is responsible for its preparation, but in reality the best approach is for both the client’s quantity surveyor and the contractor’s quantity surveyor to work together to produce an agreed account.

Professional Quantity Surveyors ensures that in accordance with common practice both the Employer (or the Employer’s representative) and the Contractor sign the Final Account Statement to signify that the Final Account figure represents the full and final settlement of all claims etc. The settlement of the final account negotiations between the contractor, and the project manager or quantity surveyor will in due course trigger the issue of the final account statement and ultimately, enable the project manager to issue the final certificate.

Quantity Surveyor’s objectives when preparing the final account

* Clear statement showing the contract sum followed by all necessary adjustments to that sum
* Prepared in accordance with the terms and conditions of the relevant contract eg. JBCC, NEC3, GCC, FIDIC, etc
* All items fully assessed and adjustments made for variations, provisional sums, re-measured works etc
* Work carried out on a dayworks basis is included
* Loss and expense claims / reimbursement accurately assessed and included
* Fluctuations where applicable are included
* Confirmation of the contractor’s agreement to final account figure is obtained in writing
* Project Manager issues final certificate for final payment to main contractor

Final Account Preparation Guidelines

Under the terms and conditions of the contract the contractor is to provide the project manager or quantity surveyor with all documents necessary for the final account preparation not later than 6 months after practical completion. Within 3 months of receipt of these documents the quantity surveyor is to prepare and ascertain the final account sum and send this to the contractor.<br />
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The bulk of the final account will generally consist of measured work priced at the original billed rates. If the contractor’s quantity surveyor has reason to doubt the accuracy of any of the original billed items, he can make a request to the quantity surveyor for work concerned to be measured on-site.

The adjustment of the contract sum in the final account normally falls under several relevant items, although the quantity surveyor must have regard to all the matters listed in the standard form of contract and conditions

The contract condition tabulates all the matters that shall be dealt with in the final account in order to adjust the contract sum in accordance with the conditions.

The following are key items to be deducted:

# Prime cost sums and amounts in respect of named subcontractors and associated contractor’s profit;
# Provisional sums and the value of work for which approximate quantities are included in contract bills;
# Variations that are omissions;
# Amounts allowable to the employer under the fluctuations clauses;
# Any other amount that is required by the contract to be deducted from the contract sum.

The following are key items to consider incorporating in the final account:

# The total amounts of nominated subcontracts finally adjusted in accordance with the relevant subcontract conditions;
# Where the contractor has tendered for work that was to have been performed by a nominated subcontractor and his tender has been accepted, the amount of the tender suitably adjusted;
# Any amounts due to nominated suppliers, including cash discounts of 5 per cent, but excluding VAT;
# The contractor’s profit on the above amounts 1,2 & 3;
# Any amounts payable by the employer relating to statutory fees and charges, opening up and testing, royalties and patent rights, and insurances;
# The value of work carried out against provisional sums or approximate quantities included in the contract bills;
# Any amounts payable by the employer to the contractor by way of reimbursement for direct loss/and or expense arising from matters materially affecting the regular progress of the works;
# Any amount expended by the contractor as a result of loss or damage by fire or other perils where the risks are insured by the employer and the contractor is entitled to reimbursement;
# Any amount payable to the contractor under the fluctuations clauses;
# Any other amount that is required by the contract to be added to the contract sum.

Conclusion

All relevant items must be shown separately in the final account, and the nett amount of each variation and amounts due to each nominated subcontractor and nominated supplier listed. When preparing the final account the quantity surveyor should give the contractor’s quantity surveyor the opportunity to be present when measurements and details are taken or recorded, so that the document is prepared in full liaison with the contractor to avoid possibility of disputes.

Delays in the settlement of the final account represent additional cost to the contractor and in the majority of cases the employer is anxious to know his ultimate financial commitment. The project manager and the quantity surveyor have a contractual responsibility under the contract to keep to the date stipulated in the contract for completion of the final account and the contractor should produce every assistance in the prompt provision of subcontractors and suppliers accounts, agreement of measurement and prices, and the supply of all necessary supporting data.

What is a final account?

2019-11-12T03:50:07Z

Bukhosi Ncube: Created page with "What is a Final Account In construction contracts, a final account is the agreed statement of the amount of money to be paid at the end of a building contract by the employer (C..."