Blog 022 - Estimated Final Accounts

Producing accurate and up to date estimated final accounts are as important to your client as they are to you. Construction clients ultimately have two main concerns, when will they get their building or asset and how much is going to cost them to get it.

The diligent thing to do here is to include an “Estimated Final Account” as part of every interim valuation. This estimate will show the Client what you forecast to be the projected final cost of your Specialist Contract package and is the total of your contract works, agreed variations and estimates for variations not yet agreed.

By submitting this on a monthly basis it allows the Client (Contractor or Developer) to have a reasonable foresight of where the value of your package might end up and has the following key benefits:

1. Permits the Contractor to report “worst case” numbers up the line to their bosses / funders / banks / clients. In my experience, it is always easier agreeing an account with a Contractor that has a sufficient allowance within his cost plan for your package than one that doesn’t. Nobody likes to report shortfalls against targets and the QS that doesn’t have sufficient allowance within his cost plan will fight tooth and nail with you, even if out of pride.

2. Helps identify significant differences in valuation of the account at an earlier stage. There could for example be a large variation that is unagreed that the Client doesn’t consider a change to your contract. This gets the conversation started earlier and affords more time for resolution rather than it appearing at the end and when time is critical may lead to a more formal dispute.

3. If there is ever a formal dispute regarding valuation, you will have the early high ground on the basis that you had been reporting figures throughout the project. If this later turns to a dispute, you can appeal to good nature of the people settling the dispute (senior management or a third party) about how this could have been avoided had the cost advice been taken on board at an earlier stage.

Early reporting of forecast final account provides your clients with data for their cost reports and increases your likelihood of payment of the changes, there is in my mind no reason not produce these on a monthly basis as part of your interim valuation.

At each assessment period I produce a total value to date, value in the period and an estimated final account. The level of detail that you provide to support the final value is entirely up to you. For items that I have yet to produce a quotation for, I prefer to insert a budget figure and clearly label it as an estimate, for the avoidance of any doubt.

In a world where everyone is just trying to do their job as best as possible and keep construction projects moving dispute free, producing the estimated final account is a small but significant task to undertake each month which can pay dividends to both the Specialist and the Contractor / Client in the long run.

If you would like to discuss your estimated final accounts, interim valuations or variations further, please feel free to drop me an email.