Final Account

Construction costs change between contract award and project close, as design variations, measured quantities, provisional sums and claims may alter the original price. A final account reconciles these items into a closing valuation, which provides a basis for final payment and helps both sides understand what remains disputed.

The Royal Institution of Chartered Surveyors (RICS) publishes guidance on final-account procedures and interim valuations, describing a process of collecting records, valuing changes and agreeing the outcome, but the signed construction contract sets the actual notices, certifications and dispute route, and RICS guidance does not override those terms. Start with the agreed contract sum and scope, and identify the pricing method: lump sum, measured work, cost reimbursement or another form.

A final account under one method cannot be built by mechanically adding every invoice, so check which costs were already included in the original price. Variations need evidence, since a site instruction may change a wall or finish but the valuation can still be debated, so keep the instruction, drawing, quotation, measured work and acceptance record, remembering that a contractor's internal cost is not automatically the amount payable under the contract's valuation rule.

Provisional sums and allowances should be adjusted to actual instructed work under the relevant terms, so if a sum was included but the work was not done it may be omitted or replaced by the correct valuation. Do not add new costs without removing the original allowance where required, because double counting can inflate the closing account.

Claims for delay or disruption may be separate from variation value, and an extension of time does not automatically mean prolongation costs are payable, so review the contract's notices, cause and supporting records and keep unresolved claims visible rather than folding them into an "agreed" total. Interim certificates and payments matter, because a final valuation of $11 million does not mean $11 million is still due if $9 million has already been paid.

Reconcile each certified and received payment, including taxes where applicable, since a bank transfer may be in transit or allocated to a different project. Retention can remain withheld until a contractual milestone such as defects completion, so identify it separately from the immediately payable balance and do not tell management that all withheld money will arrive at practical completion.

Defects and incomplete work may lead to adjustments, but the process must follow the contract, and a client cannot simply choose an arbitrary deduction without evidence. A contractor should document remedial work and responses, and keeping a joint snagging log can reduce arguments before final certification.

The project team should prepare a schedule of each adjustment showing the source document, value proposed, value agreed and status, separating agreed items from open claims so that a dispute over one variation does not stop the rest of the account from being reconciled. A simple calculation illustrates the balance: start with a $10 million contract sum, add $1.2 million of agreed variations and subtract $9 million of payments already received, giving an illustrative balance of $2.2 million before retention, tax and other adjustments.

Deadlines can affect rights, because a contract may set dates for submitting a final statement, issuing a certificate or challenging a determination, so put these in a calendar and preserve proof of submission. A final account is a documented reconciliation of contract value, changes, prior payments and remaining obligations, and the contract process determines when the number becomes final.