Last edited 15 Nov 2019

What is a final account?

In construction contracts, a final account is an agreed statement concerning the amount of money to be paid at the end of a building contract by the employer to the contractor. For more information see: Final account.

Who prepares a final account?

Quantity surveyors generally prepare final accounts, in the manner that is best suited to the particular project, with the original contract sum as the starting point. Whilst the contract may give the employer the responsibility for preparing the final account, the best approach is generally for both the employer's quantity surveyor and the contractor’s quantity surveyor to work together to produce an agreed account.

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 will trigger a final account statement and ultimately, enable the contract administrator to issue the final certificate.

Objectives when preparing the final account include:

Producing a clear statement showing the contract sum followed by all necessary adjustments to that sum.
Complying with the terms and conditions of the relevant contract.
All items fully assessed and adjustments made for variations, provisional sums, re-measured works etc.
Work carried out on a day-works basis is included.
Loss and expense claims / reimbursement accurately assessed and included.
Fluctuations where applicable are included.
Confirmation of the contractor’s agreement to the final account figure in writing.

Under the terms and conditions of the contract, the contractor is generally required to provide the quantity surveyor with all documents necessary for the final account preparation not later than six months after practical completion. Within three months of receipt of these documents, the quantity surveyor is to prepare and ascertain the final account sum and send this to the contractor.

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, they can make a request to the quantity surveyor for that work 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 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 subcontractors 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 thier tender has been accepted, the amount of the tender suitably adjusted.
Any amounts due to nominated suppliers, including cash discounts excluding VAT.
The contractor’s profit on the above amounts.
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.

All relevant items must be shown separately in the final account, and the net amount of each variation and amounts due to each nominated subcontractor and nominated supplier listed. When preparing the final account, the employer's 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 the 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 their 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 give every assistance in the prompt provision of subcontractors' and suppliers' accounts, agreement of measurement and prices, and the supply of all necessary supporting data.