Interim valuations are the periodic assessment and valuation of the work completed by a contractor during a construction project. They are typically carried out by a quantity surveyor at regular intervals, usually monthly, as set out in the construction contract. Interim valuations form the basis of interim payment certificates, which authorise the release of payments on account to the contractor for the work completed in that period.
The main purposes of interim valuations are to:
- Maintain cash flow: contractors receive regular payments for the work they have completed, helping them maintain adequate cash flow to cover labour, materials and other project costs.
- Monitor progress: the client and quantity surveyor can monitor the progress of the work and confirm that the project is on track and in line with the contract.
- Identify discrepancies: differences between the planned work and the work actually completed can be identified, allowing timely adjustments or corrective action.
- Manage risk: regular valuations provide an opportunity to identify and address potential risks, such as cost overruns or delays, before they escalate into significant problems.
The interim valuation process typically involves the following steps:
- Site inspection: the quantity surveyor inspects the site to assess the work completed, materials delivered and other relevant factors.
- Measurement: the quantity surveyor measures the completed work and compares it with the contract documents, such as the bill of quantities, activity schedule or schedule of rates.
- Calculation: based on the measurements, the quantity surveyor calculates the value of the work done, applying the agreed rates and any deductions or retention specified in the contract.
- Payment certificate: the valuation is used to prepare the interim payment certificate, showing the value of work completed, any deductions or retention and the amount due to the contractor. Depending on the contract, the certificate is issued by the contract administrator or, under NEC, the Project Manager, and the payment notices must comply with the Housing Grants, Construction and Regeneration Act 1996.
Interim valuations play a crucial role in managing construction projects by ensuring fair payment to the contractor, maintaining transparency and promoting effective communication between project stakeholders.
