What is a final account?
Settling a final account in construction brings together all the financial aspects of the contract. The overarching goal is to agree a fair valuation of the works that have been undertaken.
Reaching an agreement between parties could involve negotiation but will have to withstand the most stringent financial audit.
When agreed on, final accounts will necessitate the financial settlement with the building contractors and the issuing of a final certificate.
The final account should be at the forefront of the decision-making process once the budget has been signed off. This process should start as soon as the project migrates from the cost plan phase to the tender preparation stage.
Many of the decisions that the design team make effect the structure and content of the final account. Examples could be contract programme, procurement strategy and contractor selection etc.
What makes up the final account?
The final account is the document that amalgamates all the financial aspects of the contract. It should be a fair valuation of the works properly undertaken by the Contractor.
Contract forms have their own individual clauses relating to the final account. The manner in which you make your final account document is up to the Contract Administrator/PM.
In the example of the JCT Intermediate Form of Contract there is a clear requirement for the contractor to provide all documents reasonably required for the adjustment of the contract sum, within 6 months after practical completion of the works.
No later than 3 months after receipt of all of this information, the Quantity Surveyor or Contract Administrator must prepare a final account statement and all computations must be sent to the contractor for comment and/or agreement.
Therefore, after a maximum of 9 months from the date of practical completion, the final account must be submitted by the Quantity Surveyor/Contract Administrator to the contractor.
The contract requires the contractor to provide ALL information to the Quantity Surveyor, who then prepares the account. This process will, however, throw up many other queries from the Quantity Surveyor that the contractor will then have to support with additional information.
Generally, the final account will be made up of the following elements -
1. The original contract sum.
2. Additions and omissions as a result of variations properly instructed by the Contract Administrator.
3. Additions and omissions as a result of provisional sums properly instructed by the Contract Administrator.
4. Additions and omissions as a result of the issue by the Contract Administrator of revised drawings and/or specifications resulting in agreed re-measures of quantities.
5. Addition of money due as a result of loss and/or expense incurred by granting an extension of time.
If you wish to add tags and supporting evidence to additions and omissions ESTA allows you to capture all the information you need in one centralised location.
In projects that are simple in nature with very few variations it is generally easy to keep track of the final account. With more complex jobs there could be an excess of 100 formal instructions that vary the work. A clear, concise break down is required, firstly to streamline the agreement with the contractor, use of emails and sporadic document storage can hinder how well this is laid out and can result in dispute, and secondly the final account will have to stand up to the test of a full audit so information is required to be laid out wholly and clearly.
The statement of final account generally has no status under the contract but it does bring about a sense of finality to the negotiations between the Contract Administrator or Quantity Surveyor and the Contractor. The signing and exchange of such a document signifies that there is an agreement by the parties to the total of the monies due to the Contractor and that the final account figure represents the full and final settlement of all claims and the like.
The final certificate is a strict requirement to be issued under the contract. The effect of the issue of the final certificate is defined under the terms of the contract. It signifies that the works and any defects have been made good and are now complete.