Contractors’ accounts

Contractors' account; a service undertaken by a Chartered Quantity Surveyor to value work for a contractor, employer or third party.

As a service to contractors this tends to be a requirement of the small builder who does not employ his own quantity surveyor, or QS. More typically this service forms a post-contract role for the employer's quantity surveyor; it also arises when the contractor and employer are in dispute and a 'third party" surveyor is required to value the work done; it can also arise when the contractor becomes insolvent and the administrator or administrative receiver appoints a QS to prepare a claim for work done.

Under most JCT forms of building contract there are interim payments (every 28 days) and final payment provisions. The contractor must supply all documents reasonably required for the computation of the final account by the architect / contract administrator or by the quantity surveyor if nominated. This information generally comes from the builder in the form of a draft account showing the contract sum and a list of omissions and additions supported by copies of suppliers and sub-contractors invoices. It may include a number of loss and expense items that have not previously been included in an interim account and / or have not been instructed by the architect / contract administrator.

The architect / contract administrator or quantity surveyor, as the case may be, is then required to prepare a statement of account, with computations, detailing the adjustments to the original contract sum due to permitted variations and fluctuations (where allowed under the contract). The basis of the computation will be the original priced document (bill of quantities, schedule of work, specification or other form of contract analysis) or schedule of rates. All omissions will be valued in accordance with the priced document; likewise additional work of a similar nature to that in the priced document will be valued on a consistent basis, including the variation of approximate quantities, where the approximate quantity is similar to the actual quantity. Where there is no work of a similar nature then variations are generally to be valued on a fair basis, this is often on what is called a ‘Daywork’ basis, either using labour, plant, material and transport rates agreed at the tender stage or rates calculated in accordance with the ‘definition of Prime Cost of Daywork carried out under a building contract’ (rates periodically agreed and issued by the RICS and the Building Employers Confederation). Work done on a ‘Daywork’ basis is best supported by ‘Daywork’ sheets prepared, signed and submitted at the time the work is done. These sheets, or the builders draft account, should detail the work item, the name(s) of the tradesman or labourer involved, the days and hours worked, and the materials, plant and transport used. In addition supplier’s invoices will be required to support the cost of the materials used.

In computing the final account consideration will be given to contract variations that affect set-up or ‘management’ costs often referred to as ‘preliminaries’ (site huts, skips, insurance premiums, scaffolding, supervision and other admin costs) and an adjustment, up or down, will be made as appropriate.

Obviously care needs to be taken not to include in the account the cost of items that will be reimbursed to the contractor under other provisions of the contract such as insurance claims.
Provisional Sums (amounts allowed at tender stage for work that is not at the time fully defined or for contingency purposes) will be omitted if not expended or they will be otherwise valued in accordance with the architects / contract administrator’s instruction.

Strictly there is no requirement (under the JCT suite of building contracts) for the architect / contract administrator or quantity surveyor to agree the final account but as the contract requires variations to be valued on a fair basis it is usual for meetings and negotiations to be held between the contractor and the quantity surveyor. Differences may be due to misunderstandings or miscalculations and a meeting usually resolves these matters. Additional supporting information may also be forthcoming or re-measurement may be called for in order to settle respective claims. It is best practice to endeavour to reach ‘agreement’ in order to prevent additional cost defending a contractual claim.

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