5 BTQS3024 (2023) Week3A (Valuation)

BTQS 3024 Professional Practice
(Contract Management)
Week 3(A)
Valuations and Final Account
Sr Ng Chooi Chooi
Semester 3, 2023
BTQS 3024 (Contract Management) - Week 3A : Valuations and

1
Final Account
Section 1:
Valuations

2
Final Account
Valuations
• Insight of Valuations
• Type of payment
• Type of contract price
• What is interim certificates
• Valuations in standard forms
• In real life practice

3
Final Account
Insight of valuations
• The main purpose of valuations is to reduce the need for the contractor to
fund the development.
• The contract sum paid to contractor by instalments.
• The primary obligations of the Employer is to PAY the Contractor,

promptly and fully, unless specific reasons for withholding it.

4
Final Account
Type of payment
• Generally, there are 4 types of payment in construction contract:
1. Advance payment, ie PWD 203A, FIDIC.

2. Payment based on work executed, ie % of work done.
3. Stage payment, ie tied with schedule of payment under the Housing Development
(Control and Licensing) Regulation .
4. Bullet payment, payment upon completion of the project.

5
Final Account
Type of contract price
• Different contracts deal with the contract price in different ways.
1. Contracts with BQs – paid upon the works described and quantified.
2. Lump Sum Contracts – paid upon the schedule of works.
3. Remeasurement Contracts – paid in full based on the works completed and
quantities actually carried out.

6
Final Account
Sample of contract with BQs

7
Final Account
Sample of Lump Sum
Contract

8
Final Account
Sample of Remeasurement
Contract

9
Final Account
What is interim certificate
1. A mechanism for conforming an instalment of the contract sum is due to

the contractor.
2. Not conclusive about quality of materials, workmanship, satisfaction
with the work.
3. Only an obligation on the employer to make a payment, failing is a
serious breach of contract.
4. The most issued certificate, ie once at month.
5. As it involves payment of money, always a potential source of
disagreement.

10
Final Account
Section 2:
Valuations – PAM 2018

11
Final Account
Contract Sum – PAM 2018
• Contract Sum – the amount of money the employer will pay to the
contractor or other payable amount
• Contract sum defined in Article 2 – Article of Agreement

12
Final Account
Clause 30 Certificate and Payment – PAM 2018
• Now there is a SPECIFIC REQUIREMENT for the contractor to submit a

PAYMENT APPLICATION at Interim Claim Interval stated in Appendix ,ie 1
month, to the Architect and Quantity Surveyor, (Clause 30.1).
• The details + documentation submitted shall be agreed by the Architect

or Quantity Surveyor.

13
Final Account
• Inclusive of complete main contract + NSC’s payment application.
• Upon receipt of the Application (and FULL DETAILS), the Architect (with
Quantity Surveyor’s Certificate), has a MAXIMUM 21 days to issue a
corresponding INTERIM CERTIFICATE to the EMPLOYER, with a copy to
the Contractor.

14
Final Account
• The Architect also required to :
a. DIRECT the Contractor as the amounts payable to any of the Nominated Sub-
Contractors and Nominated Suppliers under the Interim Certificate; and
b. INFORM / NOTIFY the relevant Nominated Sub-Contractor and Nominated

Supplier as to the amounts due to them under the Interim Certificate.

15
Final Account
• Upon received of the Interim Certificate, the Employer is required to PAY

THE AMOUNTS CERTIFIED in FULL to the Contractor within the Period of
Honouring Certificates; ie 30 days from the Date of the Certificate.
• If the Employer FAILS to honour the Certificate (less any Liquidated
Damages or set-off to which he is entitled to), the Contractor may:
a. SUSPEND the work (Subject to the serving of notice) (Clause 30.7) OR
b. Charge INTEREST based on a rate of 1% + Maybank BLR on the outstanding
amount till the date payment is made (Clause 30.17) OR
c. DETERMINE (Terminate) his own employment (Clause 26.1(a)).
d. Refer to adjudication under Clause 34.1.

16
Final Account
How to derive the amount due – PAM 2018
✓ Total Value of Work Properly Executed up to the date of the Payment Application.
+
✓ Materials and goods as delivered to site in the percentage value, up to the date of the
Payment Application , not temporary works and not prematurely delivered.
LESS
✓ The Retention Sum (Clause 30.5).
LESS
✓ Previously certified amount.
= AMOUNT DUE to the Contractor.

17
Final Account
• Can we deduct Liquidated Damages in interim certificate ??

• No, cannot. Any amounts which the Employer is entitled or claim as Liquidated
Damages (Clause 22.2) or set-off (Clause 30.4) ARE NOT TO BE incorporated or
included into the interim certificate.
• Under PAM 2018, the imposition of Liquidated Damages is the Employer’s

prerogative.

18
Final Account
• For set-off by the Employer, this is only allowed under Clause 2.4, 4.4,
5.1, 6.5(e), 6.7, 14.4, 15.3(b), 15.3(c), 15.4, 15.5, 19.5 and 20.A.3.
• This is also subject to the Architect or Quantity Surveyor giving

“Complete Details of their assessment of such set-off” to the Contractor.
• The serving of a written notice (according to the prescribed procedure) is

a condition precedent prior to any deduction for Liquidated damages or
set-off.

19
Final Account
Retention Fund – PAM 2018
• Who owes the monies in Retention Fund ??

• The Contractor, Nominates Sub-contractor and Nominated Suppliers BUT the monies held in trust
by the Employer until their release as certified by the Architect (Clause 30.6(a)).
• The Employer’s interest as fund trustee and NO OBLIGATION to invest the money.

20
Final Account
• The main purpose of Retention Fund:
a. If the Contractor fails to perform his obligations, ie failure to rectify defects, the
Employer may utilize this fund to pay 3rd party to carry out the defaults works;
b. Recover the Employer’s cost and loss;
c. Safety provision against re-possession of materials and goods by the Contractor’s

suppliers, if the retention of title still not transferred to the Contractor.

21
Final Account
• Release of Retention Fund:

a. Release of 1st moiety – within 14 days upon issuance of Certificate of Practical
Completion(CPC).
b. Release of 2nd moiety – within 14 days upon issuance of Certificate of Making
Good Defects.
• Payment for both within the Period of Honouring Certificates.

22
Final Account
Final Account – PAM 2018
• Final Account (Clause 30.10):

a. Timeframe for conclude a final account as follow:
Practical Completion QS Complete Final Account Amendment
IF Dispute
Contractor Submit
Final Account
If Agree, conclusive
If not, refer to arbitration
6 months 6 months 3 months 3 months
No Dispute
Conclusive+Agreed

23
Final Account
• Items in Final Account are:
a. The adjustment made to the Contract Sum.

b. The amounts the Contractor is entitled, ie Vos.
c. The adjustment on P.C. sums and profit based on actual amount payable by the
Employer.
d. The Adjustment of Provisional Sums and omission if not expended.

24
Final Account
• Items NOT INCLUDED in Final Account are:

a. Liquidated damages imposed by the Employer.
b. Set-off by the Employer expressly provided by Clause 30.4
c. Interest payable by either parties.
• The Final Account can be rectified only if:

a. There is a fraud, dishonestly or fraudulent concealment relating to the Works;
or
b. There is any arithmetical error.

25
Final Account
Section 3:
Valuations – PWD203A(2010)

26
Final Account
Contract Sum – PWD 203A(2010)
• Clause 7 stated the consideration of the works or such other sum become
payable.

27
Final Account
Clause 28 Interim Certificate – PWD 203A(2010)
• Clause 28 regulates the issuance of Interim Certificate of payment by the

Superintending Officer.
• This enable the Contractor to be paid progressively.
• The certificate is the condition precedent to payment.
• The Contractor not able to commence action against the Government for
payment in the absence of a certificate.

28
Final Account
Clause 28 Interim Certificate – PWD203A(2010)
• When the total value of work has reach the sum referred to in
Appendix, the S.O. is only obliged to carry out valuation for issuing the
1st interim certificate (Clause 28.1).
• For each subsequent valuation, the S.O. obliged to value the work
property executed, and unfixed materials, provided the value is equal
or more than referred in Appendix (Clause 28.2)
• The S.O. to value works properly executed, reject value the work with
patent defect.

29
Final Account
Appendix to the Conditions – PWD203A(2010)
Amount stated here

30
Final Account
Clause 28 Interim Certificate – PWD203A (2010)
• The S.O. shall issue an Interim Certificate within 14 days from the date
of valuation .
• Provided THAT
1. The Contractor returned the signed Letter of Acceptance;
2. The Contractor has deposited the relevant insurance policies.

31
Final Account
• The amount due in the Interim Certificate derived as follow :

✓ Estimated Value of Work Properly Executed
+
✓ 90% value of the unfixed materials and goods delivered to site, not temporary works and not
prematurely delivered.
+
✓ Fluctuation of Price (Clause 30)
LESS
✓ Advance Payment (Clause 69).
LESS
✓ Previously certified amount.
= AMOUNT DUE to the Contractor.

32
Final Account
• In clause 26.8(a), the Government must pay the Contractor amount

certified as due in the Interim Certificate, within 30 days (if none specific)
from the issuance of certificate; provided:
• The Contractor has furnished performance bond;

• If the Contractor opted for the Performance Guarantee Sum, the Government is
entitled to retain 10% from the amount due. The limit of retention is 5% of the
Contract Sum.

33
Final Account
Clause 60 Advance Payment – PWD203A (2010)
• The Contractor entitled for advance payment:

✓ 25% x Contract Sum less Provisional Sum (Builder Works).
✓ With Maximum of RM10mil.
• The Conditions for entitlement are :

✓ Return of the duly signed Letter of Acceptance, insurance policies, SOSCO,
receipt on premium paid;
✓ Banker’s/Insurance Guarantee = value of advance payment
✓ Submission Banker’s/Insurance Guarantee not later 3 months after site
possession.

34
Final Account
Clause 60 Advance Payment – PWD203A (2010)
• Recoupment of advance payment:

✓ Recoup when the Builder work executed and certified up to 25%.
✓ Fully recovered when builder work reaches 75%.
✓ Formula to calculate :

35
Final Account
Clause 31 Final Account – PWD203A (2010)
• The Contractor must submit final claim with 3 months from Certificate
of Practical Completion.
• The submission must substantiated with relevant documents,
calculation including NSC, NS claims, receipt and vouchers.
• The S.O. is obliged by clause 31.3 to issue the Final Certificate within 3
months after the expiry of the Defects Liability Period or after the
Certificate of Making Good Defects, whichever is the later.
• The form is silent on how long the S.O. needs to complete his
assessment on the final account.

36
Final Account
Clause 31 Final Account – PWD203A (2010)
• By clause 31.4, the Final Certificate must state the debt payable either by
the Government to the Contractor or vice versa.
• Debt payable = final assessment – permissible deductions
• Clause 31.5 , the Contractor is required to furnish a statutory declaration

on all wages has been paid, before the Government pay.
• The wages include wages of labour employed by all the sub-contractors,
nominated and domestic.

37
Final Account
Section 3:
Valuations – CIDB(2000)

38
Final Account
Contract Sum – CIDB (2000)
• CIDB Form 2000, contract sum as defined in Article 2 of Article of
Agreement :-

39
Final Account
Clause 24 – Payment – CIDB (2000)
• Submission of Claim:
• The Contractor submit the Statement of Work Done to the S.O. at the interval
stated in the Appendix, ie 1 months.

40
Final Account
Clause 24 - Payment – CIDB (2000)
• Statement of Work Done:

• Stage payment subject to agreement between parties for the Works or any part of
the Works(Clause 42.1(a)).

41
Final Account
• Valuation and Interim Certificate:

• The S.O. to issue an interim certificate within 21 days upon receiving of Statement
of Work Done.
• Amount Due in Interim certificate = :
• Work done less
• Retentions Monies (Clause 42.3) less
• Amount previously certified less
• Any sum certified to be deducted

42
Final Account
• Retention Monies (Clause 42.3):

• 10% retention , up to limit of 5% .
• The Employer shall be fiduciary as trustee.
• The Employer shall place the retention monies in a separate banking account.
The Employer is entitled for full benefit of the interest.
• The Employer has the right’s of deduction.
• Release 1st moiety – upon CPC.
• Release 2nd moiety – upon CMGD.

43
Final Account
• Final Account (Clause 42.8):

• Within 3 months from Date of Practical Completion, the Contractor shall submit
the “Statement of Completion” which set out the final amounts of his
entitlement.
• The SO shall not later than 90 days after the issuance of CMGD, provide the
Final Account.
• The Final account shall show:
1. The adjustment made to contract sum.
2. The Contractor’s entitlement.
3. The Employer’s express entitlement.

44
Final Account
Payment Bond v Performance Security Deposit
– CIDB (2000)
• What is a Payment Bond ??
• What is a Performance Security Bond ??

45
Final Account
Payment Bond – CIDB (2000)
• Payment Bond:
• Under Option Module E.

• 5% of Contract Sum.
• The Banker’s bond or insurer’s bond submitted by the Employer to the Contractor
within 14 days upon issuance of the Letter of Award.
• For the due performance and observance by the Employer under Clause 42.
• Valid until final payment made by the Employer.

46
Final Account
Performance Security Bond – CIDB (2000)
• Performance Security Bond:

• Under Option Module F.
• 5% of Contract Sum.
• The Performance Security Bond in the form of Banker’s bond or insurer’s bond or
cash submitted by the Contractor to the Employer within 14 days upon issuance of
the Letter of Award.
• For the due performance, observance and obligations of the Contractor under the
Contract.
• Valid until issuance of Certificate of Practical Completion.

47
Final Account
Unfixed equipment stored off site – CIDB (2000)
• Unfixed Equipment Materials or Goods Stored Off Site:

• Under Option Module B.
• The Contractor can claim for unfixed equipment, materials or goods before
delivery to Site ; provided:
1. The invoices and receipts of payment submitted,

2. Intended for the works,
3. In accordance with the Contract,
4. Suitably store, marked or identified at the premises.
5. Cannot fully and properly incorporated into the Works.
6. Not prematurely delivered and adequate storage place.

48
Final Account
Section 4:
Valuations – IEM CE (2011)

49
Final Account
Contract Sum – IEM CE (2011)
• Article of agreement
• The Terms – item 2

50
Final Account
Clause 58 – Interim Certificate – IEM CE (2011)
• Clause 58.1 deals with the Contractor’s interim payment application and
timing.
• The Contractor may submit the Interim payment application at the interval
fixed in the appendix, if not stated is monthly.
• The Contractor include total work done, unfixed materials, completed

Variations, claims from NSC, in the application.

51
Final Account
• By clause 58.2 the Engineer must issue Interim Payment Certificate within
21 days after received the Contractor’s application.
• The Employer must pay the Contractor within the Period of Honouring
Certificate , clause 58.3.
• The Employer is entitled to set-off or deduct from the payment.
• If the Employer fails to pay, a simple interest as additional payment will
add to the certified amount.

52
Final Account
• Pursuant to clause 58.4, if the Employer fails to pay full amount, and
continue 14 days after Period of Honouring, the Contractor may serve a
written notice.
• Options for the Contractor:
a) Suspend the works;
b) Reduce the rate of construction.
• In either of the above option, the Contractor is entitled for:
• Extension of time; clause 42.2(1)
• Additional costs; clause 42.2(1)

53
Final Account
• Retention Monies
• 10% of retention in certified amount.
• Limit of retention 5% of the Contract Sum.
• Release Retention Monies

• 2.5% , issue the Certificate of Completion.
• 2.5%, issue the Certificate of Making Defects.

54
Final Account
Clause 59 – Final Account – IEM CE (2011)
• Clause 59.1 states, the Contractor must submit proposed final account
within 3 months after Certificate of Making Good Defects.
• The Contractor must substantiate the claim with supporting documents,
quantities, measurement & etc.
• By clause 59.2, the Engineer may issue the final account with 2 months
from the Contractor’s submission.
• The Employer to pay the Contractor the final certified amount within the
Period of Honouring.

55
Final Account
Clause 60 – Effect of certificate – IEM CE (2011)
• No certificates is conclusion evidence of the acceptability of design.

• No interim payment certificate or Final Payment is final and binding.
• The Contractor is obliged to make good defects.

56
Final Account
Option Module B – Price Fluctuation IEM CE (2011)
• The Contractor is allow to claim changes price for cement, steel

reinforcement bars, bitumen and diesel.
• The Contractor must include tender base price in his tender submission.
• The Contractor is entitled to claim price fluctuation in the monthly
payment application.
• Adjustment for prices must calculate based on the formula stipulated.

57
Final Account
Case Law 1 – Issue of certificate
• English case law, London Borough of Camden v Thomas Mclnerny & Sons
Ltd (1986) 9 Con LR 99 held that:
• The mere signature of the architect on a certificate does not amount to its
issue.
• The dictionary meaning of “issue” means “to send forth, to give or send
out officially; to put into circulation”.
• Thus, since the certificate was signed and held back, it was not issued and
had no effect.

58
Final Account
Case Law 2 – Interim certificate
• Usima Sdn Bhd v Lee Hor Fong, [2018] 1 CIDB-CLR 29.

• Usima was appointed as a main contractor by Jabatan Kerja Raya (JRK).
• Usima appointed a sub-contractor, Lee Hor Fong (“LHF”) to carry and
complete the contract works within the main contract.
• The terms and conditions of main contract using JKR 203A(Rev.10/83)
were deemed the basis of the sub-contract.
• Usima terminated the employment LHF.
• The whole works thereafter completed by Usima.

59
Final Account
• LHF commenced legal action to claim for payments for works done prior to
its termination.
• The High Court decided in favour of Usima in relation to termination and
counterclaim.
• The Court of Appeal decided other wise and allowed LHF’s claim.
• The Federal Court allowed LHF’s claims based on the interim certificate
jointly and measured and certified by Usima and JKR.
• The Federal Court held that LHF’s silent on the written notice, allowed
Usiam invoke sub-clause 51(c) to terminate his appointment.

60
Final Account
• Lessons Learnt:
• Contract documentation must be drafted clearly and agreed by both parties.

• For progress claims, the method and formats, the time for claiming must be clear
and consistence.
• Valued jointly by the Employer and the Contractor.
• All progress claim computed in cumulative manner.
• All instructions related to the work, must be in writing.

61
Final Account
In real life practice – Architect’s Certificate
- Attention to Contractor
- Certificate Number
- Date of Certificate
Certified work done
for NSCs
Certified work done

for Contractor
Materials on Site
Retention Sum
Previously Certified
Amount

62
Final Account
In real life practice – Architect’s Certificate
Certified work done

to the respective NSCs

63
Final Account
Recap of lecture week 3A
• The intention of interim certificate.

• Exam relevant clauses in PAM 2018, PWD 203A (2010), CIDB (2000),
IEM CE 2011.
• Retention sum, limit of retention sum.
• Final account.
• Case law
• Architect’s certificate, in real life practice.

64
Final Account
References
• Agreement and Conditions of PAM Contract 2018 (with quantities).

• Standard Form of Contract to used where Bills of Quantities form part of the
Contract , P.W.D. Form 203A (Rev 1/2020).
• CIDB Standard Form of Contract for Building Works 2000 Edition.
• IEM Form of Contract for Civil Engineering Works, 2011 Edition.
• The Malaysian PWD Form of Construction Contract , 2nd Edition, Lim Chong Fong.
• Guide on the CIDB Standard Form of Contract For Building Works, Ong See Lian,
Tan Swee Im , Ir Oon Chee Kheng.
• CIDB Construction Law Report 2017.

65
Final Account
Quote of the day
“Count your age by friends, not years.

Count your life by smiles, not tears.”
― John Lennon

66
Final Account
Thank you for your attention!!

67
Final Account

5 BTQS3024 (2023) Week3A (Valuation)

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BTQS 3024 Professional Practice

BTQS 3024 (Contract Management) - Week 3A : Valuations and

BTQS 3024 (Contract Management) - Week 3A : Valuations and

BTQS 3024 (Contract Management) - Week 3A : Valuations and

• The contract sum paid to contractor by instalments.

• The primary obligations of the Employer is to PAY the Contractor,

BTQS 3024 (Contract Management) - Week 3A : Valuations and

• Generally, there are 4 types of payment in construction contract:

1. Advance payment, ie PWD 203A, FIDIC.

BTQS 3024 (Contract Management) - Week 3A : Valuations and

• Different contracts deal with the contract price in different ways.

BTQS 3024 (Contract Management) - Week 3A : Valuations and

BTQS 3024 (Contract Management) - Week 3A : Valuations and

BTQS 3024 (Contract Management) - Week 3A : Valuations and

BTQS 3024 (Contract Management) - Week 3A : Valuations and

1. A mechanism for conforming an instalment of the contract sum is due to

BTQS 3024 (Contract Management) - Week 3A : Valuations and

BTQS 3024 (Contract Management) - Week 3A : Valuations and

BTQS 3024 (Contract Management) - Week 3A : Valuations and

• Now there is a SPECIFIC REQUIREMENT for the contractor to submit a

• The details + documentation submitted shall be agreed by the Architect

BTQS 3024 (Contract Management) - Week 3A : Valuations and

• Inclusive of complete main contract + NSC’s payment application.

BTQS 3024 (Contract Management) - Week 3A : Valuations and

• The Architect also required to :

b. INFORM / NOTIFY the relevant Nominated Sub-Contractor and Nominated

BTQS 3024 (Contract Management) - Week 3A : Valuations and

• Upon received of the Interim Certificate, the Employer is required to PAY

BTQS 3024 (Contract Management) - Week 3A : Valuations and

= AMOUNT DUE to the Contractor.

BTQS 3024 (Contract Management) - Week 3A : Valuations and

• Can we deduct Liquidated Damages in interim certificate ??

• Under PAM 2018, the imposition of Liquidated Damages is the Employer’s

BTQS 3024 (Contract Management) - Week 3A : Valuations and

• This is also subject to the Architect or Quantity Surveyor giving

• The serving of a written notice (according to the prescribed procedure) is

BTQS 3024 (Contract Management) - Week 3A : Valuations and

• Who owes the monies in Retention Fund ??

BTQS 3024 (Contract Management) - Week 3A : Valuations and

• The main purpose of Retention Fund:

b. Recover the Employer’s cost and loss;

c. Safety provision against re-possession of materials and goods by the Contractor’s

BTQS 3024 (Contract Management) - Week 3A : Valuations and

• Release of Retention Fund:

• Payment for both within the Period of Honouring Certificates.

BTQS 3024 (Contract Management) - Week 3A : Valuations and

• Final Account (Clause 30.10):

BTQS 3024 (Contract Management) - Week 3A : Valuations and

• Items in Final Account are:

a. The adjustment made to the Contract Sum.

BTQS 3024 (Contract Management) - Week 3A : Valuations and

• Items NOT INCLUDED in Final Account are:

• The Final Account can be rectified only if:

BTQS 3024 (Contract Management) - Week 3A : Valuations and

BTQS 3024 (Contract Management) - Week 3A : Valuations and

BTQS 3024 (Contract Management) - Week 3A : Valuations and

• Clause 28 regulates the issuance of Interim Certificate of payment by the

BTQS 3024 (Contract Management) - Week 3A : Valuations and

BTQS 3024 (Contract Management) - Week 3A : Valuations and

BTQS 3024 (Contract Management) - Week 3A : Valuations and

BTQS 3024 (Contract Management) - Week 3A : Valuations and

• The amount due in the Interim Certificate derived as follow :

BTQS 3024 (Contract Management) - Week 3A : Valuations and