Interim valuations and payments – a simple refresher.
Whether you are involved in administering hundreds of payments each month or just a few, these simple tips and guidance should help or provide a simple refresher.
Payments are simple once you get your head around the timeframes and the contractual process. Issuing applications in line with the contract terms in addition to being proactive with information is a big step of the way to ensuring payments are made on time.
This guidance is based on an unamended JCT D&B 2016. In most cases, the contract will be amended and worth reviewing to check for slight tweaks to the below.
The Payment Application under JCT D&B 2016 will be required to be issued no later than 4* days before the valuation date which may require a forecast up to the valuation date. Setting out the format of the application, in particular the detailed breakdown should reflect the Contract Sum, giving the same level of breakdown within the Contract.
Agreed variations are to be included and valued up to the valuation date. Where variations are unagreed or perhaps on a fast-moving project where changes have yet to be agreed, we recommend providing a detailed breakdown to the variation (including invoices, measures and photos) as well as a detailed justification for the variation including any reference to the contract.
We should add, that providing detailed breakdowns and justification for entitlement within a valuation does not relieve you of any contractual requirements for notification of changes – i.e. if the contract stipulates a specific change control process, this should still be adhered to. (We will detail this in a future article).
Following a Payment Application, an assessment will take place to value the measured contract works and variations applied for. On reviewing the application there may be a disagreement with the works completed to date, the PQS should detail their assessment with the reason for any differences (including any photos or marked-up drawings to support the justification) in the assessment. This will then form your Payment Notice and under JCT D&B 2016, must be issued before 12 days* following the Valuation date. (The payment notice may also be referred to as the payment certificate).
Pay Less Notice
If after the Payment Notice is issued and something comes to light (for example incomplete works) which the PQS deems a deduction is to be made against the Payment Notice, a Pay Less Notice can be issued. This is required to be issued no later than 5 days before the final date for payment. The deduction should be broken down with justification for rates applied and clear reasoning for the deduction.
A few things to remember:
- The days stated above are calendar days not business days so, don’t get caught out.
- Where payments are scheduled out to a defined date, any application/valuations past this will not be due until the Final Account Payment.
- 7-day notice can be issued if payment is not made in line with the payment terms to suspend works until full payment is paid in line with the Payment Notice or Pay Less Notice.
- Where a Contract does not state payment terms, the Housing Grants Construction and Regeneration Act 1998 applies.
*These timeframes are based on the standard unamended JCT D&B 2016 – please check your contract for any amendments.
If you are unsure with any of the above or would like some assistance with interpretation of your contract and/or its amendments, we would be happy to help.