Preparing final accountsThe final account is prepared at the completion of the construction phase of a project. As the name implies, the final account is a document that brings together all the financial aspects of a project into one single document. Its purpose is to allow both the employer and the contractor to value the complete project.TimingThe contract states when the final account should be prepared. Often, if the project's financial report has been prepared in a similar format, it is possible to use that document as the basis of the final account itself. TheJoint Contracts Tribunalcontract JCT 05 Private Without Quantities, clause 4.5.1, states that not later than six months after practical completion, the contractor shall provide the quantity surveyor with all the documents needed for the adjustment of the contract sum.RemeasuresUnder 'traditional' contracts based upon bills of quantities (BQs), it is necessary to remeasure the works for the final account. However, if the BQs have been measured from accurate drawings produced at the tender stage, it is not necessary to remeasure the whole project. Elements that have been subject to change or design development will need to be remeasured on site or, alternatively, from as-built drawings. Sub-structure and drainage sections are nearly always remeasured, due to the uncertainty of ground conditions, depths, and so on.Once the remeasured value has been ascertained, the original BQ allowance should be omitted from the final account.While undertaking the remeasuring of works, the project surveyor is advised to identify all the items or quantities included in the BQ that are described as 'APPROXIMATE' or 'PROVISIONAL'. Such items and quantities should be remeasured, or omitted from the final account, as appropriate. Items of this nature are often included in BQs as allowance for possible works that are not detailed on the tender drawings but which the surveyor, for example, deems will form an integral part of the completed works.Architect's instructionsDuring the course of the works, architect's instructions (AIs) will be issued. These record changes to the tender drawings. They may simply detail a small item, or alternatively, may comprise a drawing issue which may, on occasion, change a complete element.When the AI concerns a prime cost (PC) sum, provisional sum or provisional item, the item is first entered in the AI section of the final account, with a cross-reference to the appropriate section. Cost values are not included against the AI section, but in the section concerned.Upon receipt of the instruction, an approximate value should be established and entered at the bottom of the sheet. The approximate value of the AI will be established by measuring approximate quantities to establish an estimated value. The value should be entered onto the Financial Report AI Summary Sheet for Financial Report Purposes.As the contract progresses, the instruction or variation should be measured and priced accurately, as soon as possible after receipt. Ideally, this should be no later than immediately after the work is actually executed on site. The value will be agreed with the contractor's quantity surveyor or the private quantity surveyor (PQS) and entered on the sheet as 'AGREED'.Anticipated architect's instructions (AAIs)During the course of the contract, information that may be considered as a possible variation, such as a letter, sketch, drawing, minute of a meeting, conversation or site instruction, may arise. Initially, this information may not be confirmed in an AI. However, it is best practice to be aware of such potential variations and to undertake due assessment of the financial reports prepared and issued to the employer by the private quantity surveyor (PQS) or the contractor's surveyor.The process for valuing or costing such variations is identical to that outlined above for AIs.When undertaking and completing a final account, it may be necessary to seek AIs for items of works undertaken by the contractor, but not necessarily instructed. During the course of the works, the contractor will issue contract variation instructions (CVIs) or requests for information (RFIs) directly to the architect. This procedure is adopted to facilitate the audit trail for the contractor and allows information to be sought from the design team, perhaps through the clarification of a particular detail or specification.However, it is best practice to request that the architect issues formal AIs to cover all such variations.

Provisional and cost sumsPrime cost sumsThe use of prime cost sums (PCSs) is less now than in the past, due to the limited adoption of the nomination process of sub-contractors and suppliers on the part of the client's team or the design team.At the commencement of the contract, each prime cost sum (PC sum) should be identified, including allowance for profit and overheads, general attendance and other attendance relating to the PC sum.An architect's instruction (AI) will be necessary to authorise the expenditure of the PC sum. The AI will state the name of the nominated sub-contractor (NSC) or supplier and the value of the order.If variations occur to the NSC package, it will be necessary to make further adjustments. Nominated suppliers or sub-contractors generally issue final accounts for the package in question. Variations will need to be checked and priced in the same manner as that detailed for AIs and anticipated architect's instructions (AAIs) above. It will also be necessary to adjust for profit and to consider adjusting the 'attendance and builders' work' item. Invoices should also be checked for discounts.Provisional sums and provisionally measured itemsProvisional sums fall into two categories - defined and undefined. General Rule 10 of theStandard Method of Measurement for Building Works(7th edition) (SMM7) clarifies the distinction between the two in the following way.DefinedA Provisional Sum for defined work is a sum provided for work which is not completely designed but for which the following information shall be provided:(a) The nature and construction of the work.(b) A statement of how and where the work is fixed to the building and what other work is to be fixed thereto.(c) A quantity or quantities which indicate the scope and extent of the work.(d) Any specific limitations and the like identified in Section A35.

UndefinedA Provisional Sum for undefined work is a sum provided for work where the information required in accordance with rule 10.3 cannot be given.

Again, it is best practice to list these on separate sheets, as with the prime cost (PC) sum.It is often useful to produce a schedule of every set of provisionally measured items (seeRemeasures), cross-referencing these to the relevant bills of quantities (BQ) items and ensuring that there are no sums or items hidden in obscure places in the BQs, such as preliminaries.Expenditure of the sum or item is generally via a site instruction or architect's instruction (AI). As the contract progresses, work carried out must be measured and recorded, with the resulting value included in the cost report and adjusted as necessary.The amount included in the final account must be completed on the basis of the agreed information.

AdditionsClaimsFormal claims are less prevalent than previously in the construction industry. This is a direct result both of the Egan Report -Rethinking Construction- and the ethos of partnering.If a claim is to arise, or seems a possibility, allowance for the cost associated with it must be included in the cost report. Allowance should be made for a significant potential claim only after discussion with the architect in order to ascertain its appropriateness and effect upon the contract.The word 'claim' elicits a very emotional response in construction. Often, people become defensive with regard to their position on claims, sometimes to the detriment of the project as a whole. For this purpose, claims should be approached and dealt with as a team, with the involvement of the architect, engineer and employer, and not made solely the responsibility of the quantity surveyor. The quantity surveyor, however, will value the claims upon agreement of the issues involved.It is advisable to consider claims as a separate issue for final account statement purposes.DayworksDayworks are used to value and agree works (such as architect's instructions - AIs - and so on), which cannot be valued by other means. Dayworks are, in effect, a timesheet signed by the clerk of works or the architect to verify that the items stated are the actual hours worked or the materials and plant utilised.The RICSDefinition of Prime Cost of Daywork Carried Out Under a Building Contractis used for establishing the appropriate rate. This is usually subject to an adjustment, a percentage addition to the daywork sheet. The percentage adjustment includes an element of profit and overheads on the prime cost (dayworks).For final account purposes, a schedule of dayworks will be maintained and referenced against the relevant AI.FluctuationsGenerally, construction contracts are now fixed-priced for the duration of the contract, with the contractor allowing for price increases in labour or materials or plant (and so on) in his or her tender. The risk for such increases lies with the contractor.On larger construction projects, that will take a number of years to complete, fluctuations may apply.Indices such as theDTIPrice Adjustment Formula indices (previously the NEDO indices) are used to agree price increases due to inflation.Value added taxThe final account shall be exclusive of value added tax (VAT), unless the contract directs otherwise. Generally, the contract sum will also be net of VAT.Internal audit of the final accountFor best practice, it is recommended that an internal audit of the final account is undertaken on completion.