1 / 34

FINAL PAYMENT and FINAL ACCOUNT

FINAL PAYMENT and FINAL ACCOUNT. Definition of Final payment and Final Account. Final payment is a type of payment made by the owner of the work (Employer) to the contractor when works have got final acceptance.

Download Presentation

FINAL PAYMENT and FINAL ACCOUNT

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript


  1. FINAL PAYMENT and FINAL ACCOUNT

  2. Definition of Final payment and Final Account Final payment is a type of payment made by the owner of the work (Employer) to the contractor when works have got final acceptance. It is the last payment from the owner to the contractor of the entire unpaid balance of the contract sum as adjusted by any approved change orders. As per FIDIC Conditions of Contract Art 14.11, Final Payment is a type of payment deliver to the Employer by the Engineer after the contractors draft final statement has got acceptance by the Engineer. As per PPA type Conditions of Contract Art.57.1, final account is the amount decides by the Engineer and payable to the Contractor depending on a detailed account of the total amount that the contractor considers payable under the contract.

  3. FINAL PAYMENT and FINAL ACCOUNT As per Art 3272(1) of Civil Code of Ethiopia, it is a means of settlement of accounts which determine the amount due by the administrative authorities and thenceforth bind the parties in an irrevocable manner. Legal and Contractual feature In construction contracts, the primary obligation upon the Employer is to give the contractor the sum of money which forms the consideration for the contract .When we discuss about Final payment, the performance obligation of the contractor has been completed since his right to request for the same is upon getting final acceptance of works from the engineer. The contractor shall submit his request for the amount due as per the contract and the employer shall pay the same if it gets approval by the engineer. If not ,dispute may arises between parties.

  4. FINAL PAYMENT and FINAL ACCOUNT • Legal and Contractual effects of Final Payment and • Final Account • When the owner(Employer) makes final payment and release • retention to the contractor, both parties waive most of their rights • to make further claims against the other. • As soon as the owner makes final payment to the contractor, final • acceptance of works also confirmed and has no any contractual • ground to request for further rectification of defects. • Acceptance of contractor’s final payment is also an indication for • the completion of contractor general obligation stated under • Clause 4.1 of FIDIC and clause 16.1 and 35.1 of PPA type • general conditions of contract.

  5. FINAL PAYMENT and FINAL ACCOUNT • If there is a disagreement on the final payment amount requested • by the contractor and approved by the engineer ,dispute between • Contractor and Employer may arises. • Procedures for final payment and final account • Preparation • The contractor shall request for acceptance of works when he • assumed that it is completed and ready for the intended use. • Depending on the contractor’s request, the engineer shall • arrange work inspection date in the presence of representatives • from the three parties. All works shall inspect by the inspection • team and necessary defects that need rectification or correction • shall record and jointly signed.

  6. FINAL PAYMENT and FINAL ACCOUNT • The engineer shall give an instruction to the contractor to make necessary corrections for works that recorded as defective during the final work inspection. • The contractor shall make necessary corrections as per the given instruction and request for engineers final inspection again after the completion of making corrections on the defected works. • When the engineer accepts the completion of works, performance certificate or defect liability certificate has issued to the contractor.

  7. FINAL PAYMENT and FINAL ACCOUNT • The contractor shall prepare the final payment by making revision on all previous periodic payments made by the owner and the entire unpaid balance of the contract sum as adjusted by any approved change order. Any unpaid work items (new work items from the original BOQ) due to unit rate not fixed by the engineer, work items suspended unpaid due to different reasons should be finalized and included in the preparation of final payment certificate by the contractor.

  8. FINAL PAYMENT and FINAL ACCOUNT Submission FIDIC Clause14.11 Application for Final Payment Certificate: Within 56 days after receiving the performance certificate, the Contractor shall submit, to the Engineer, six copies of a draft Final Statement with supporting documents . PPA Clause 57.1 Final Account: The Contractor shall supply the Engineer with a detailed account of the total amount that the Contractor considers payable under the Contract before the end of the Defects Liability Period. Correction As per the above discussions the contractor shall prepare and submit his maximum final amount to the engineer that he considers payable under the contract.

  9. FINAL PAYMENT and FINAL ACCOUNT Depending on contractor’s application for final payment or final account, the engineer will request for clarification or correction. FIDIC Clause 14.11 , If the Engineer disagrees with or cannot verify part of the draft Final Statement, the Contractor shall submit such further information as the Engineer may reasonably require within 28 days from receipt of the said draft and shall make such changes in the draft as may be agreed between them. PPA Clause 57.1 if the contractor’s final account is not correct and complete, the Engineer shall issue within 60 days a schedule that states the scope of the corrections or additions that are necessary.

  10. FINAL PAYMENT and FINAL ACCOUNT If the Final Account is still unsatisfactory after it has been submitted, the Engineer shall decide on the amount payable to the Contractor and issue a payment certificate. Approval After the contractor’s application for the final payment or final account and making any corrections as per clause 14.11 of FIDIC and clause 57.1 of PPA, the engineer shall forward his decision accordingly. MDB FIDIC Sub- Clause14.11……………… If the engineer and the contractor agrees on the draft final statement, then within 28 days after receiving the final statement and discharge, the engineer shall deliver to the employer and to the contractor the final payment certificate.

  11. FINAL PAYMENT and FINAL ACCOUNT PPA clause 57.1 ………………. The Engineer shall issue a Defects Liability Certificate and certify any Final Payment that is due to the Contractor within 60 days of receiving the Contractor’s account if it is correct and complete. Disapproval If there exists a disagreement between the engineer and the contractor after the draft final statement or final account submitted to the engineer by the contractor, then MDB FIDIC Sub- Clause 14.11……………… However if, following discussions between the Engineer and the Contractor and any changes to the draft Final Statement which are agreed, it becomes evident that a dispute exists,

  12. FINAL PAYMENT and FINAL ACCOUNT the Engineer shall deliver to the Employer (with a copy to the Contractor) an Interim Payment Certificate for the agreed parts of the draft Final Statement. PPA Clause 57.1 …………… If the final account submitted by the contractor is not correct and complete, the Engineer shall issue within 60 days a schedule that states the scope of the corrections or additions that are necessary. If the Final Account is still unsatisfactory after it has been resubmitted, the Engineer shall decide on the amount payable to the Contractor and issue a payment certificate.

  13. FINAL PAYMENT and FINAL ACCOUNT Possible Disputes in the Final Payment and Final account If there exists a difference on the draft final statement, even after a discussion between them, this implies that a dispute exists and the engineer issues an interim payment certificate for the agreed part of draft final statement and the remaining or the disagreement part will decide following the dispute procedure under Sub-Clause 20.4[Obtaining Dispute Board’s Decision] or Sub-Clause 20.5 [Amicable Settlement].   In the case of PPA, the Contractor shall supply the Engineer with a detailed account of the total amount that the Contractor considers payable under the Contract.

  14. FINAL PAYMENT and FINAL ACCOUNT The Engineer shall decide on the amount payable to the Contractor and issue a payment certificate. If the contractor believes that the decision was wrongly taken by the Engineer, the decision shall be referred to the Adjudicator within 14 days of the notification of the Engineer’s decision as per Clause 24: Disputes.

  15. FINAL PAYMENT and FINAL ACCOUNT CASE STUDY: Duri –Dewele Road Drainage Structure, Contract II DureDewele Road drainage structure project is located under Somali Regional State and ends at Dewele which is the border town near to Djibouti; the project was constructed by one local contractor . The work comprises the construction of drainage structures within 83 km road section. The Employer is Ethiopian Roads Authority (ERA). The construction of the road has been completed and Final Payment Certificate has been submitted. Before the Contractor submission of Final Payment Certificate, the following activities were conducted.

  16. FINAL PAYMENT and FINAL ACCOUNT • The contractor requested the engineer to facilitate the final acceptance of the project notifying his completion of works under the project, through his letter dated October 6, 2005. • Joint assessment of the project for final acceptance in the presence of representatives from the Client, Contractor and Consultant made on October 14, 2005. • The Engineer instructed the contractor to correct all the defects through his letter dated on October18,2005 by attaching list of stations and remarks given during the joint assessment date (October 14,2005). • Again final inspection of the project conducted on October 28, 2005 by a committee comprising the representatives of the Employer, Consultant and Contractor.

  17. FINAL PAYMENT and FINAL ACCOUNT • The Engineer issued Certificate of Final Completion to the employer copy to the Contractor through his letter dated on November 10, 2005. • The Engineer issued Final Payment Certificate to the Employer copy to the Contractor through his letter dated on November 23, 2005. • The details of the Final Payment Certificate are presented here under. • The Payment Certificate contains the following major sections:

  18. FINAL PAYMENT and FINAL ACCOUNT Final Payment Certificate Sheet: This sheet contains all the details of the Final Payment in summary showing: Main Contract amount, Amount due to Variation orders, Previous Payments Amount, Amount due to the Final Payment, Price Adjustment (Escalation), Retention money, Advance Payment made and repaid, Interest for Late Payment (if any), Correction of Certificated (if any), Legislation Adjustment (if any), Net Amount of this Certificate, Currencies of payment and any other information. A sample of the form is presented here under.

  19. FINAL PAYMENT and FINAL ACCOUNT

  20. FINAL PAYMENT and FINAL ACCOUNT As shown above the summary contains all pertinent information about previous payments and other data required for the final payment. 2.0 Summary of measurement Sheet: This sheet shows contract amount of works with respect to their group, final executed amount of works with respect to their group and escalated amount.

  21. FINAL PAYMENT and FINAL ACCOUNT A sample of the form is presented here under.

  22. FINAL PAYMENT and FINAL ACCOUNT 3.0 Work Measurement Sheet: This sheet shows the contract quantity and total executed quantity of work items in the bill of quantity. A sample of the form is presented here under.

  23. FINAL PAYMENT and FINAL ACCOUNT 4.0 Summary of Price escalation sheet This sheet shows the amount of price escalation effected on all previous interim payments, the escalated amount considered in the final payment and total amount of escalation in the project. A sample of the form is presented here under

  24. FINAL PAYMENT and FINAL ACCOUNT

  25. FINAL PAYMENT and FINAL ACCOUNT 5. Price Adjustment Factor Sheet: This sheet shows price adjustment factor for Fuel, Cement, Reinforcement Steel, Structural Steel, and the Total Adjustment Factor. The sheet contains the Base Indices price with the date and the detail adjustment from the start of the project to end of the project. Finally, from all the information given above we can conclude that the project was administered by the PPA type conditions of contract and all procedures and time gaps between procedures were reasonable with respect to time limitation stated under PPA.

  26. FINAL PAYMENT and FINAL ACCOUNT Comparison Table for MDB FIDIC Vs PPA in relation with regulating Final Payment and Final Account

  27. FINAL PAYMENT and FINAL ACCOUNT

  28. FINAL PAYMENT and FINAL ACCOUNT

  29. FINAL PAYMENT and FINAL ACCOUNT The Dispute settlement procedure

  30. FINAL PAYMENT and FINAL ACCOUNT

  31. FINAL PAYMENT and FINAL ACCOUNT Conclusion As can be understood from the above discussion the Engineer shall have the power to decide upon the amount payable to the Contractor and issue a Final Payment Certificate, provided that the Contractor’s detailed Final Account is unsatisfactory after it has been resubmitted. However if the contractor believes the decision was wrongly taken by the Engineer, the decision shall be referred to the Adjudicator within 14 days of the notification of the Engineer’s decision as per Clause 24: Disputes. As described under Sub-Clause 14.11 [Application for Final Payment Certificate] i.e. under 3.2 of this paper, the Engineer shall agree with the Contractor on the Final statement.

  32. FINAL PAYMENT and FINAL ACCOUNT But if, following discussion between the Engineer and the Contractor and any changes to the draft Final Statement which are agree, it becomes dispute. The dispute can finally be resolved by Dispute Boards Decision [Sub-Clause 20.4] or other Amicable Settlement [Sub-Clause 20.5]. This clearly shows that the Engineer has no power to decide on the amount of Final Payment under the FIDIC Harmonized Edition (2006) Conditions of Contract. And the application of dispute settlement is also clearly stated under the same clause. Therefore the FIDIC Harmonized Edition (2006) Conditions of Contract will not be ambiguous and has treated the issue in a better way.

  33. FINAL PAYMENT and FINAL ACCOUNT The other difference between these two Conditions of Contract, PPA and FIDIC Harmonized Edition (2006) Conditions of Contract, is the time sequence (duration) between the subsequent procedures and the procedures to the Final Payment and Account even though the effects under each is considered to be the same. Under the PPA General Conditions of Contract, the Contractor supply the Engineer with a detailed account of the total amount that the Contractor considers payable to him under the Contract before the end of the Defects Liability Period, after which the Engineer shall issue a Defects Liability Certificate and certify any Final Payment that is due to the Contractor within 60 days of receiving the Contractor’s account if it is correct and complete.

  34. FINAL PAYMENT and FINAL ACCOUNT But, under the FIDIC Harmonized Edition (2006) Conditions of Contract, the Contractor shall submit to the Engineer six copies of a statement at completion, within 84 days after receiving the Taking-Over Certificate for the work, and the Engineer shall deliver, to the Contractor and to the Employer, the Final Payment Certificate within 28 days after receiving the Final Statement and Discharge. The effects of Final Account and payment are not expressed in detail in case of PPA General Conditions of Contract. But, under FIDIC Harmonized Edition (2006) Conditions of Contract the effects of the Final Payment are expressed in detail. They are presented under Sub-clause 14.11, 14.12 and 14.14 which are discussed above.

More Related