5.

0 CONSTRUCTION PROCEDURE – CONSTRUCTION PHASE

5.1 Commencement of Construction Work

In very broad terms, the word ‘commencement’ means beginning something. In the construction
industry this generally refers to the contractor beginning the construction works, i.e. the point at
which site clearance, demolition, excavation or construction begins. On commencement of the main
contract to construct the works, the client hands over possession of the site (and contractor's work
area(s)) to the contractor. Commencement may also have contractual implications, as the date for
possession of the site by the contractor may be set out in the contract. If the client fails to give
possession of the site to the contractor, and there are no provisions for delay in the contract, then they
will be in breach of contract.

Even if the contract does provide for delay in giving possession of the site to the contractor, the
contractor may still be able to claim for an extension of time and perhaps loss and expense. If no date
for possession is included in the contract, then the site must be handed over to the contractor within
a reasonable time after signing of the contract. On commencement of the works, the contractor may
become responsible for insurance, security of the site and so on, and may be obliged to progress
regularly and diligently with the works, or to achieve certain key dates.

This handover procedure may take place at a formal handover meeting which is an opportunity to:
• Discuss issues related to continued occupation of any part of the site (particularly on a
refurbishment project) such as access.
• Discuss security arrangements and emergency procedures.
• Issue any significant information about the site (such as site services, tree preservation orders
etc.).
• Discuss ongoing maintenance, operation and protection issues regarding existing structures,
landscape or other features to be retained.
• Discuss noise and dust reduction measures.
• Verify insurance provisions.
• Read meters.
• Provide contact details for key personnel on both sides.
• Discuss access for client's personnel and representatives or other client contractors.

Contracts generally grant the contractor exclusive possession of the site until practical completion
when a handover meeting takes place and possession reverts to the client. During the site handover
process, many issues can arise, so it's massively important that clients, contractors and other
participating parties communicate effectively during this period in order to smooth the transition.

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5.2 Site Handover Letter to Contractor or Client
A site handover letter is one of the tools which clients, contractors and subcontractors use to shift
the onus of the project and the site to another party, after their work is deemed complete. A site
handover letter can simply serve as the confirmation of a site handover, or it can include more detail
which helps the new site owner or operator understand what has been handed over, and what hasn't.
Not all site handover letters look the same. Site handover letters to clients and contractors will look
different, as will site handovers on different projects. But maintaining a standardized site handover
letter which you can use as a template for all of your different sites and projects is really helpful.
This template can serve as your general site handover framework, and you can easily adjust and
modify pieces of it to suit different projects. You want your site handover process to be neat and
professional, and you want your site handovers to be as clear and concise as possible, so that you
don't run into issues and disputes later down the line. Handover letter covers the required
information, and provides some important additional details which parties need to be aware of - and
need to be able to reference.

5.2.1 Sample of Site Handover Letter

Company Name
Address
Contract Name
Contract Number

RE: SITE HANDOVER

I am writing with respect to [Insert project or site name] to confirm the Handover Date and
occupancy of [Insert site/building etc.] effective [Insert date] as discussed with your team. This letter
will serve as our confirmation and your agreement of various aspects respecting the handover.
Please review and if you are in agreement with the content, please sign, date and return the signed
letter to [Insert responsible person name], at the above address.
• Insurance information:
• Warranties:
• Manuals and record drawings:
• Completion of prime responsibilities:
• Operations and maintenance of building site:
• Disposition of surplus equipment and materials
• Presence of staff on site:

We are pleased to hand over this facility to [Insert company name], and appreciate the on-going
support and assistance from you and your staff. Should you have any questions with respect to the
above, please contact [Insert name] on [Insert phone number].

Signed by: Authorized Person

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5.3 Obligations of Parties under Construction Contract
Traditional Method of construction delivery is commonly used in Tanzania. The traditional method
is one in which a client has a direct contract with consultants (professionals/ designers) to carry out
the design of the works and also probably the supervision of the construction. Consultants are
normally in independent professional practice, with no ties to construction or property development
commercial undertakings. The client also has a direct contract with a contractor. The contractor is
likely to be in contract with suppliers of materials of all kinds and with subcontractors for carrying
out specialist works. Each party under the contract has obligations to fulfill.

5.4 Employer/Client Obligations

Obligations of employer under construction contract include the following:

i) To employ the engineer/project manager, who will administer the contract;

ii) To provide site. This may be done all at once, or, if the contract has so specified, part of
the site may be made available on certain dates. Note, if parts of the site are not available
when they should be, any delay or extra costs the contractor incurs may lead to claim
against the employer.
iii) To pay the Contractor for completed work. Every month or as the case may be, the
contractor makes a claim for payment which the Engineer/Project Manager must check
and change where necessary, and the employer must then pay the Contractor the amount
the Engineer/Project Manager has certified.
iv) To make available to the Contractor, prior to tender, all ground investigation information.
Contractor is then responsible for interpreting these data for the purposes of constructing
the work.

5.5 Contractors Obligations

The contractor’s obligations are more involved and include measures that attempt to ensure that the
Contractor will produce a finished job, within time, and also to the necessary standard. In detail they
are as follows:

i) Must construct and complete the Works, and must provide all the labour, materials, plant and
temporary works necessary. Also, responsibility for safety of all site operations rests with
the Contractor.
ii) Contractor is assumed to have made such a visit and inspected the site before preparing
his/her tender. This is because it is recognized that a visit to site of the Works before any
work is started can reveal much about the problems and difficulties that will be faced when
work begins – problems that cannot so readily be detected from the drawings alone
iii) Must submit a program to show how s/he intends to carry out the work for Engineer’s/ Project
Manager’s approval. The program must show the order in which the Works will be carried
out. Conditions of contract do not specify what format should be adopted, viz. CPM, bar
chart time distance chart. Most contractors submit bar charts.

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 iv) Contractor may be required to submit details of any temporary Works to be used in the
construction of the permanent Works
v) Contractor is responsible safety of people and property in general. In particular, s/he is
responsible for:
• The safety of all persons entitled to be on the site;
• The care of the Works;
• Damages to persons and property resulting from the construction process, and must
take out insurance to cover any claims arising from these areas.
vi) On completion of the Works the contractor must clear the site, leaving it in a
workmanlike condition
vii) All workmanship and materials must conform with the standards laid down in the
contract, and samples for testing must be made available as requested, before the
materials are incorporated into the Works
viii) Contractor must allow the Engineer/ Project Manager access to all parts of the site and,
and in particular, must not cover up any work without the consent of the Engineer/ Project
Manager.

5.6 Duties and Powers of Engineer/Project Manager

The Engineer’s/ Project Manager’s involvement in the contract is very extensive and will be reported
under the following headings:
i) General
ii) Variations
iii) Claims and
iv) Certificates and Payments

5.6.1 General

The following are the Engineer/ Project Manager general duties and powers:
i) Where the Contractor has carried out work that is not up to the standard laid down in the contract,
she/he has the power to instruct the contractor to remove the work and/ or require it to be properly
redone.
ii) Time for completion of the works will have been specified, but one of the Engineer/ Project
Manager first duties is to write to the Contractor and confirm the date for commencement. The
Contractor is the expected to start work as soon as is reasonably possible after that date. If there
are no delays to the contractor for which the Employer is responsible, then the Works should be
substantially complete when the time for completion has expired [see Fig. 5.1 (a)]. If the
Engineer/ Project Manager judges that the Contractor is late in completing the works, the
contractor must pay damages to the Employer for each day or week the contract is late. These
damages are known as liquidated damages and the level of payments will have been stated in the
tender documents. In Tanzania, PPA Cap 410 specify that: A procurement entity shall impose

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 on a tenderer, a liquidated damages for delayed services or delayed works. The rates of liquidated
damages per day shall be- (a) in the case of procurement of works, 0.10 up to 0.15 per cent of
the contract value per day up to a sum equivalent to the amount of the performance guarantee;
and (b) in the case of employment of consultant, 0.10 up to 0.20 percent of the contract value
per day up to a sum equivalent to the amount of the performance guarantee. The liquidated
damages rates shall be specified in the request for proposals or tender documents and in the
contract, and the maximum amount of the liquidated damages shall be equal to the amount of
the performance bond or guarantee established in the contract. Where there have been delays
that the Contractor could not have envisaged, provisions of the conditions of contract intitles the
Contractor to an extension of time for completion of the works where:
• Additional work is instructed by the Engineer/ Project Manager;
• There are increased quantities of work above those shown in the bill of quantities;
• There is exceptional adverse weather.
In these circumstances, the Contractor must make a claim for an extension of time and the
Engineer/ Project Manager will assess whether an extension is justified and, if so, how long it
should be. Where an extension is granted – and it may be requested and granted part-way through
the job – this delays the point at which liquidated damages may be deducted [see Fig 5.1 (b)].

Date for commencement

Fig. 5.1: Contract Time (a) Contract time without delays (b) Contract time with delays

iii) The progress of all or any part of the Works may be suspended on the Engineer’s/ Project
Manager’s written order and the Contractor must then protect and secure the suspended section.
Depending on whether this suspension was included in the original contract, the contractor may
have claims for additional payment and possible extension of time. Example of an unplanned
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 suspension would be the discovery of archaeological (fossils, coins, articles of value etc.) where
the construction is to take place.
iv) On a complex project, there will be many reasons why original details in the contract document
cannot be constructed, and the Engineer/ Project Manager has the power to vary the Works as
necessary or desirable. A simple example of such a variation is shown in Fig. 5.2 and stems from
a mistake at the design stage. The figure shows a length of sewer to be constructed between
manholes at A and B, but the design invert levels at the manholes and the actual ground profile
between the manholes, the drain would be above the ground between a and b.

Fig 5.2: Error in drainage layout

Clearly this could not be constructed, and as soon as the error was detected it would be realized
that the design would need to be changed and the Contractor instructed. This instruction may be
given orally in the first instance, but should be followed up by a written site instruction. An
example of a site instruction to correct the above defect can be as shown in Table. 5.1.

Table 5.1: Confirmation of verbal Instruction

ABC Consult (T) Ltd

20-10-2023
To: XYZ Construction Ltd
Site: Malimbe, SAUT
Section: Drainage
I confirm the following Site Instruction:
1. Manhole A on drawing No. SM/R104/3 is to be constructed as a type 3/300/B with revised
invert level of 35.425 m
2. Manhole B on drawing No. SM/R104/3 is to be constructed as a type 3/300/B with revised
invert level of 33.216 m
3. The connection drain between manholes A and B is to be constructed as a 300 mm carrier
drain type D, with revised invert levels of 35.425 m at A and 33.216 at B.
Method of Payment: BoQ Part 3.1.10.5 items 22 & 27
Dr. Victor W. M Project Manager

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v) If the Engineer/ Project Manager at any time believes that the Contractor is not making sufficient
progress to complete the Works on time, s/he may write to the Contractor to ask that steps be
taken to ensure timely completion.
vi) It is the Engineer/Project Manager job to determine how much the Contractor should be paid by
admeasurement; that is by remeasuring the actual work done. This remeasurement is aimed at
paying the Contractor for work done: however, it should be realized that if a wall is specified to
be built 2.5 meters high, say and the Contractor builds it 2.7 miters high by mistake, the
Engineer/Project Manager might accept it, but would only pay for the height of wall specified.
vii) Quantities in the BoQ are not always correct and conditions of contract allows the
Engineer/Project Manager to revise a rate where there is an increase or decrease in the actual
work done compared to the estimates that renders the quoted rates unreasonable. Example, the
BoQ might state that there is 10 000 m3 of excavation, but it is later realized on measurement
that there is only 2 000 m3 of materials to be excavated. In such a case, the Contractor might well
argue that the rate s/he placed in the BoQ was low because of the large quantity, and that with a
much-reduced quantity, the rate would have been much higher. Here clauses in the conditions
allow the Engineer/Project Manager to consider the Contractor’s arguments for an increased rate
and make an adjustment if the case was seen to be reasonable.

5.6.2 Construction Variations

The particular nature of the construction process makes the subject of variations an important one.
Variations can be referred to in many different ways. A variation (sometimes referred to as a change)
is an alteration to the scope of work originally specified in the contract, whether by way of an
addition, omission, or substitution to the works, or through a change to the manner in which the
works are to be carried out. Generally, a variation is a change to the scope of works under a contract.
In the past, they were referred to as Architect’s or Supervisor’s instructions, more recently they are
referred to as variations, in some cases Change Orders.

Inevitably, because the parties are unable to anticipate everything which may happen or where a
contract is agreed before the design or scope of works are fully finalized, frequent changes are often
required. Unless a variation is instructed, a contractor is required to follow the works as originally
specified - otherwise it would be in breach of contract. In the absence of a variations clause, the
Contractor’s obligation will be limited to completing the work described in the contract and there
will be no obligation to undertake any variations or additional work.

In legal terms, a variation is an agreement, supported by consideration, to alter some of the terms of
a contract. No power to order variation is implied, and so, within the Contract, there must be express
terms which give the power to instruct variations. In the absence of such express terms the Contractor
may reject instructions for variations without any legal consequences. Variations are primarily
governed by clauses contained in the contract document. For example, clauses 13.1 to 13.3, of
FIDIC, sets out the right to vary the works and the procedure to be followed. In the Red and Yellow
Books, the Employer is not entitled to instruct variations directly. Instead, the Employer must direct
its instructions through the Engineer - otherwise the Contractor would not be bound to comply with
it.
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There are two main types of variations:
▪ variations to the scope of works and services; and
▪ variations to the terms of the contract itself.
Most standard form contracts define variations broadly. For example, some standard form of contract
describes variations as directions given by the superintendent to:
• increase, decrease or omit any part of the work under the contract;
• change the character or quality of any material or work;
• change the levels, lines, positions or dimensions of any part of the work under the contract;
• carry out additional work; or
• demolish or remove material or work no longer required by the principal.
The first step in identifying a variation to the scope of works and services is the identification of the
scope itself. The scope of works is defined by the contract, commonly by reference to documents
such as working drawings and specifications or a project brief. If works or services are part of the
scope then they cannot be considered a variation.
A variation can arise at the initiative of either party (subject to an express right to instruct or request
the variation), or from circumstances beyond the control of both parties such as latent conditions and
changes in legislative requirements.
The courts have established a number of general principles in relation to variations:
• An item specifically provided for in the contract is not a variation;
• When the contractor supplies material of a better quality than the quality required by the
contract, without any instruction from the principal, it is not entitled to charge the extra cost
as a variation;
• When the contractor does work not called for by the contract and without instruction, it is
not entitled to charge this additional work as a variation;
• Indispensably necessary works are not a variation; and
• Design development may be a variation.

5.6.2.1 Indispensably Necessary Works

The courts are likely to require a contractor to perform all work which is indispensably necessary
for completion of the work, even if each and every minor item of work involved is not specifically
referred to in the contract (Walker v Council of the Municipality of Randwick (1929) 30 SR (NSW)
84).
For example, a plan shows that the contractor must construct two doors in a room, and the
specifications do not specifically refer to any hinges on those doors, supplying the hinges will be
found to be part of the scope, as it is work which is indispensably necessary for the completion of
that work. Contracts often also provide that such work is not a variation or is work which the
contractor is required to perform under the contract.

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5.6.2.2 Design Development
Often a dispute can occur over whether works arising out of design development are a variation. The
question which arises is the point at which design development becomes a change in the scope of
the work. The following case involved a construct only contract and looked at situations where
changes were part of design development and where they were a variation.
Case Study: Multiplex Constructions v Epworth Hospital (unreported) (28/06/1996) Vic CA
Facts of the case: Multiplex (the contractor) was engaged by Epworth Hospital (Epworth) under a
fixed price contract for the re-development of the Epworth Hospital.
Epworth was responsible for providing the design to Multiplex. However, the design was incomplete
at the date of tender.
The contract stated that variations excluded: “any change/s or additional work/s caused by or
resulting from the development of the design of the works (including…the development of the design
for that part of the Works not documented or not fully documented as at the date of the Builder’s
tender and/or in the [contract documents])’.
Result: Although Multiplex had accepted the risk of Epworth’s development of ‘the design’ that did
not make the contract open-ended.
Once a design component had been ‘fully exposed’, its design development was at an end. Once
‘fully exposed’, Epworth could still refine the exposed design at Multiplex’s expense. Anything
beyond refinement would be a variation except where some other design development had a
consequential impact.
The court gave an example of consequential impact. If Floor 5 of the works was fully documented
in the contract drawings but Floor 6 was not, and in developing the design of Floor 6 the hot water
pipes are shifted significantly leading to consequential changes to Floor 5 (where the design was
otherwise complete), these changes can be said to be ‘caused by or resulting from the development
of the design of the Works’ and are not variations.
In another example, if toilets were added to the drawings where there were previously none, this
alteration would be a variation, not design development.

5.6.2.3 Important to Note

The Engineer can order a variation to the works. Engineer may not order variations to the contract,
which can only be done by agreement between the Employer and the Contractor. The Engineer
"shall" order variations that are necessary for the completion of the works. It must be remembered
that the power to order variations is restricted to variations in the works. The works are defined in
the contract and are usually described in brief description at the beginning of specification, or Bills
of Quantities.

The Engineer therefore cannot order work that is not defined within the scope of the contract.
If he does, he is acting outside his powers, and two things may follow:
• The Contractor need not carry out the instructions.
• The Employer need not pay.
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The Contractor's only right then would be to sue the Engineer personally for the cost of the work.
Alternatively, the Employer may sue the Engineer for the cost of such works.
• Variations must be issued in writing, and the contractor has the right to confirm verbal
instructions from the Engineer.
• Such confirmation is itself defined as an Engineer's Instruction

5.6.3 Construction Claims

There are several clauses in the Conditions of Contract that give the Contractor a right to claim
additional costs and, in some circumstances, additional time. In general, the procedure is as follows:
1) The Contractor must give notice of the intention to claim as soon as s/he becomes aware of
the circumstances that are believed to justify a claim.
2) The Contractor must then keep contemporary records to support the claim.
3) As soon as possible, the Contractor must submit an account detailing the grounds for the
claim and the amounts being claimed. This account may be updated at intervals as the full
extent of the claim becomes clear.
4) If the Contractor complies with the above procedures, s/he is entitled to payment on the claim
to the extent that the Engineer/Project Manager considers is due.

In the context of civil engineering contract, normally a claim means a demand by a Contractor for
payment of an item or items of work carried out by him on behalf of the Employer for which a
readily identifiable amount cannot be ascertained under the terms of the contract. Such a claim is
made upon the Employer but under FIDIC conditions of contract the Engineer first considers it and
should his decision be disputed it is adjudicated by arbitration or in courts of law. It is important that,
as soon as a potential claim situation arises, the Contractor makes the Engineer aware of the facts;
so that both may keep such contemporary records as they think necessary to substantiate/verify the
value of the claim, and any extension of time involved. The Engineer and Contractor should as far
as possible agree the facts of the claim as they arise. The facts can be agreed without the Engineer
necessarily accepting any liability on behalf of the Employer. The agreed facts can be measurements,
labour and plant time sheets, calculations, daily diary sheets, reports, photographs and other relevant
records.

Before writing his/her claim, the Contractor should collect together all the information upon which
he is going to rely. In addition to the items above, s/he may require information on his/her tender:
• Rate build-ups, site visit reports, and any research undertaken for the tender.
• It is changes from what was known at the time of tender that give rise to the claim.
• The burden is on the Claimant (usually the Contractor) to prove his/her claim.

As an example of a contractual claim, consider a site on which there is a large excavation in material
that the boreholes show to be relatively soft. During the work, a sizeable volume of harder material
is found but there is no item in the BoQ for excavation in rock. The contractor claims under
conditions of contract that the rock constitutes a “physical condition that could not reasonably be
foreseen by an experienced contractor”, and begins to keep records of what s/he says are additional
costs. These might involve the use of pneumatic tools or explosives, or a reduced productivity with
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existing plant. The Engineer/Project Manager, who will eventually receive claims for additional
payment from the contractor, must first decide whether a claim is justified. There may be some
doubt, as the actual hardness of the harder materials may not be so much harder than the material
that showed up in the boreholes. If the Engineer/Project Manager does accept the basis for claim,
s/he may not accept the amount of money the contractor is claiming can be justified. A decision
must, however, be taken and payment made to the Contractor.

5.6.3.1 Claims Presentation

Claims are traditionally submitted in a similar form to that required for a Statement of Case in the
courts. The claim document will consist of the following:
• A title page: giving the title of the contract, the number of the claim and its date, together
with the names and addresses of the Employer and the Contractor.
• An index page: giving the main headings of the claim, and the Sections into which it is
broken down.

Section 1:
Will give a citation of the Contract Particulars. These will include the name of the parties, the date
of formation, and the documents forming the contract. The main details from the Appendix to the
Form of Tender will be quoted: Time for Completion, Liquidated Damages, Period of Maintenance
and the Date for Commencement.

Section 2:
Will set out the clauses under which the Claim is being made and the facts relating to the reason for
the claim. This is usually very brief, and does not detail the events that gave rise to the actual
expenditure.

Section 3:
Will detail the evaluation of the claim. This is the important part. It will detail all the additional
expenditure involved, and the references of documents from which it is obtained. The claim should
be accompanied by all drawings, documents, photographs and other evidence upon which the
Contractor relies.

5.7 Compensation Events

Compensation Events can result in changes to the project key dates and will normally result in
additional payment being made to the Contractor. In essence, Compensation Events are those
occurrences which are not the fault of the Contractor but which have an effect on the contract
completion date. These can be events which come about as the result of actions by the Client, or
events such as exceptionally adverse weather for which no one can be blamed.
The list of events which normally lead to a Compensation Event found in some Clauses of the
Contract include:

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 • Instructions to change the service (unless this results from accepting a defect, or from a change
requested by the contractor);
• Failure to provide access;
• Failure of the client to provide equipment, plant or materials;
• An instruction to halt or delay the works;
• Work done by others;
• Conditions that could not reasonably have been foreseen;
• Exceptionally adverse weather (beyond one in ten-year frequency);
• Force majeure (such as an epidemic or an ‘act of God').

The PPRA conditions of contract stipulate that following shall be Compensation Events:
i) The Employer does not give access to a part of the Site by the Site Possession Date as per
GCC 28.1.
ii) The Employer modifies the Schedule of Other Contractors in a way that affects the work of
the Contractor under the Contract.
iii) The Project Manager orders a delay or does not issue Drawings, Specifications, or
instructions required for execution of the Works on time.
iv) The Project Manager instructs the Contractor to uncover or to carry out additional tests upon
work, which is then found to have no defects.
v) The Project Manager unreasonably does not approve a subcontract to be let.
vi) Ground conditions are substantially more adverse than could reasonably have been assumed
before issuance of the Letter of Acceptance from the information issued to tenderers
(including the Site Investigation Reports), from information available publicly and from a
visual inspection of the Site.
vii) The Project Manager gives an instruction for dealing with an unforeseen condition, caused
by the Employer, or additional work required for safety or other reasons.
viii) Other contractors, public authorities, utilities, or the Employer does not work within the
dates and other constraints stated in the Contract, and they cause delay or extra cost to the
Contractor.
ix) The advance payment is delayed.
x) The effects on the Contractor of any of the Employer’s Risks.
xi) The Project Manager unreasonably delays issuing a Certificate of Completion.
xii) Other Compensation Events described in the SCC.

5.8 Certificates and Payments

Most of the details on payment procedures are normally given in specific conditions for particular
Application. The details include matters concerning advance payments. How and when they should
be made together with method to be adopted for repayments. There are a number of certificates that
will be issued at particular points in the progress of the contract as shown in Fig 5.3. Each month or
as the case may be, Contractor submits to the Engineer/ Project Manager a statement detailing the
money s/he considers due (often called a valuation). The Engineer/ Project Manager must adjust the
valuation as s/he sees fit and certify the actual amount payable in an interim certificate. This payment
must be made to the Contractor within 28 days of receiving the valuation.
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 Fig. 5.3: Certificates required by conditions of contract

5.8.1 Interim certificates

A contactor is entitled to monthly account payments for work carried out. The work is valued at the
rates in the Bills of Quantities. The Contractor is obliged to put into each monthly statement sums
that he considers himself entitled as a result of claims under various clauses of the contract. There is
a minimum amount for the interim certificate below which the Engineer/ Project Manager need not
issue a certificate. After the receipt of the monthly statement, the Engineer/ Project Manager must
certify and the Employer pay within a fixed period, or else the contractor is entitled to interest. An
interim certificate will usually include:
▪ Payment for original contract work measured by BoQ items;
▪ Payment for varied work using BoQ items;
▪ Payment for varied work on a daywork basis;
▪ Payment for varied work using built-up rates (interim rates may be used while negotiations
are still ongoing on the final rate to be adopted and these are sometimes known as rates);
▪ A percentage may be payable for materials on site which are not yet incorporated into the
Works;
Interim payments on claims may be made:
▪ Where an “adjustment item” has been used, a percentage of the adjustment item amount will
be added or deducted in proportion to the amount of work done.

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All these sums represent the total work done up to the date of the valuation, and to determine how
much the Contractor should be paid this month must deduct the amount paid last month. Another
deduction is also made, known as ‘retention’

5.8.2 Substantial completion certificate

When the contractor believes the work is substantially complete, is required to submit to Engineer
and Client the following items:
• A letter requesting that the work be inspected to determine that it is substantially complete
• A list of incomplete or non-conforming work which remains to be done.
• This list becomes the basis of the “snagging list” or “punch-list”.
• The as-built drawings for the project. This is a complete set of drawings which have been red
lined to indicate conditions constructed that differ from original design.
• Other specified deliverables indicated in the contract documents as prerequisites for
substantial completion.
• This includes training of operating staff on the building/structure systems and may include
commissioning documents.

After receipt of the Contractor’s request, the Engineer and Client will schedule a substantial
completion inspection; to determine whether or not the project is substantially complete and to
perform the snag list /punch-list inspection(s).

If the work is determined to not be substantially complete the Engineer will:

1) Notify the contractor in writing that the work is incomplete;
2) Clearly identify all items which prevent substantial completion from being granted; and
3) Require the contractor to promptly remedy these deficiencies and to provide a second request
for substantial completion when they are considered complete.

If there is nothing major on this list and if the Employer can sensibly make use of the constructed
facility, the Engineer/ Project Manager will issue the certificate. During the Defects Correction
Period that follows the issue of the Certificate of Substantial Completion, the Contractor must:
▪ Complete any outstanding contract work;
▪ Remedy any defects resulting from unsatisfactory workmanship or materials that become
evident during the period
▪ Carry out repairs as instructed by the Engineer/ Project Manager, for which additional
payment may be made.

At the end of the Defects Correction Period, provided all repairs have been made good, the Engineer/
Project Manager will issue a Defects Correction Certificate.

5.8.3 Final account and final certificate

Within three months of the date of the Defects Correction Certificate the Contractor must submit to
the Engineer/ Project Manager a statement of final account detailing all the sums s/he considers to
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be due under the contract. This lists all the monies that the contractor considers himself entitled to
under the contract. Thereafter, the Contractor may not put in any further claims. The Engineer/
Project Manager then has a further three months in which to issue the Final Certificate showing the
amount that s/he considers are finally due for the work carried out. The balance must then be paid
within 28 days. The Final Certificate will include similar items to the interim certificate, with the
following exceptions:
i) All of the BoQ work will have been completely remeasured and final quantities agreed.
ii) Any rates for varied work will either have been agreed or fixed by the Engineer.
iii) There should be no “materials on site” element.
iv) Claims payments, contract price fluctuations and adjustment item payments should all be
final figures.
v) No retention will be deducted.

Contractor may of course dispute the final certificate issued by the Engineer under the Arbitration
clause

5.9 Project Completion (Construction Contact Closeout)

Purpose of contract closeout is to provide procedures for granting Substantial Completion, and
contract closeout. It establishes the steps to be taken and ties together the procedures for substantial
completion and Final acceptance of the project by the Client. When it is Done: Contract closeout
activities need to be initiated well in advance of substantial completion. Process Tasks: Contract
closeout can be broken down into two steps. Substantial completion, and recommendation for Final
acceptance.

Completed contract is one that is both physically and administratively complete. A contract is
physically complete only after all deliverable items and service called for under contract have been
delivered and accepted by the client. A contract is administratively complete when all payments
have been made and all administrative actions accomplished. There is no single procedure that can
be used for full range of contract types. Essentially it is a review and documentation of the fulfilment
of all contract requirements

Contract close out is quite simple with respect to a firm-price, or off-the-shelf supply contract
where the file contains documents that the end product has been received, inspected and accepted
and that full payment has been made. The process is more complex when large contracts containing
progress payments, partial deliveries and many change orders are involved. However, the end
objective is the same, to determine if the contract fulfilled all requirements of the contract and if the
Procuring Entity/Client fulfilled its obligations.

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