Interim certificate

An Interim Certificate is an important document that is issued by the appropriate authority during a construction project to signify the payment for the work completed as of a certain date. It is used to show the progress of the project and the payments made for the work completed up to the given date.

Interim certificate is the most frequenly used certificate in construction contracts, often use interchangeably with a progress certificate. It has to fulfill two functions, such as controlling the work progress and normalizing installment payments or interim payments, agreed with the contractor .

Elements of interim certificate

Generally, the Interim Certificate includes details such as:

• The total contract amount: This is the total amount of the contract as agreed upon by both parties.
• The portion of the contract completed: This is the percentage of the contract that has been completed as of the date indicated on the Interim Certificate.
• The amount paid to date: This is the amount of money that has been paid to the contractor up to the date indicated.
• The amount due: This is the amount of money that is still owed to the contractor up to the date indicated.

Example of Interim certificate

A typical Interim Certificate includes the following information such as the name and address of the contractor, name and address of the employer, project name and location, contract number, date of the certificate, date of the contract, period of the certificate, total contract amount, value of work completed, value of work accepted and inspected, the amount paid to date, the amount due, and the signature of the certifying officer. In addition, the Interim Certificate may also include details such as the deduction for defects, the deduction for materials not accepted, the deduction for extra works, and the deduction for other items, if applicable.

In summary, a typical Interim Certificate includes details such as the name and address of the contractor and employer, project name and location, contract number, date of the certificate, date of the contract, period of the certificate, total contract amount, value of work completed, value of work accepted and inspected, the amount paid to date, the amount due, and the signature of the certifying officer. It may also include additional details such as the deductions for defects, materials not accepted, extra works, and other items, if applicable.

When to use Interim certificate

Interim Certificates are typically used when the work of a construction project is ongoing and payments need to be made to the contractor at regular intervals. This allows both parties to track the progress of the project and ensure that each side is meeting their obligations. Interim Certificates can also be used to keep track of any alterations or additions to the original contract. In summary, Interim Certificates are used when the work of a construction project is ongoing and payments need to be made to the contractor at regular intervals. They can also be used to keep track of any alterations or additions to the original contract.

Types of Interim certificate

There are several types of Interim Certificates that can be issued during a construction project. These include:

• Progress Payment Certificate: This is usually issued during the course of a project and is used to document the amount of money paid for the work completed up to the date indicated.
• Final Payment Certificate: This is issued at the completion of a project and is used to document the amount of money paid for all the work completed up to the date indicated.
• Retention Payment Certificate: This is issued at the completion of a project and is used to document the amount of money retained by the employer to cover any potential claims or costs that may arise in the future.

Important issues

Fig.1. Interim certificate and interim payments

Below are some interesting facts :

• The certificate guarantees a steady flow of cash, which in turn is the driving force of the construction industry. Payments to the contractor's account are made before work is completed. Provisions on periodic payments to the contractor are described in more detail in the Act of The Housing Grants, Construction and Regeneration Act 1996.
• In accordance with clause 4.9.1 and 4.9.2, once in a while, the architect is to issue such temporary statements in which the amounts are fixed, to be granted to the contractors. The amount of installment reflects a certain percentage of work performed by contractors.
• The interim certificate is forwarded to the Employer and the copy goes to the Contractor.
• By setting the amount in the certificate, attention is paid to the valuation rules contained in clauses 4.10, 4.16 and 4.20 inclusive of the work performed up to the given moment and this is to take place no later than 7 days before the date stated on the certificate. Consequently, the amount specified does not include cash earned within the last 7 days prior to the date of the certificate.
• The time to issue the first temporary certificate should not exceed one month from the date of the certificate of ownership. The next certificates of this type should appear exactly on the same day of each subsequent month up to the official date of completion of works. It may happen that the given date will fall during the weekend or public holiday. In this case, the date of issue of this certificate will be postponed to the nearest business day .

A look from two sides to the matter

It is essential to look at the situation related to the date of issuing the certificate, based on the observations of both parties :

• From the contractor's point of view "the exact position of the day in the month when an interim certificate is to be issued may well affect his cash flow as, for example, his invoices for materials become payable at the end of the month. Also, if the formula method of recovery of fluctuations applies, the fluctuations amount include in a valuation will be affected by the relationship between the ‘valuation date’ and the date of publication of the monthly indices" ;
• From the Employer's point of view "the ‘interim certificate date’ will affect his cash flow situation also. If the Employer is a public authority and it is necessary for payments to be approved by a finance committee, then the date of the committee meeting in each month may have a direct bearing upon the most appropriate date for the issue of interim certificates, if payment is not to be delayed unduly" .

Advantages of Interim certificate

Interim Certificates have several advantages for both the contractor and the client. For the contractor, they provide an assurance that they will be paid for the work they have completed and provide a steady flow of cash for the project. For the client, Interim Certificates provide an opportunity to monitor the progress of the project and to ensure that the contractor is meeting their obligations. Additionally, Interim Certificates can be used to prevent disputes between the contractor and the client by providing an up-to-date record of payments and progress.

Limitations of Interim certificate

Interim Certificates have certain limitations that should be taken into consideration when using them. The main limitation is that they only reflect the payments made and do not include any adjustments or changes that may have occurred since the last certificate was issued. Additionally, they do not provide a detailed breakdown of the materials used or the labor costs incurred, which may be needed to accurately assess the progress of the project. Finally, they do not provide any protection against potential disputes concerning the work that has been completed.

Other approaches related to Interim certificate

Another approach related to Interim Certificate is the use of a retention payment. A retention payment is a portion of the total contract amount that is withheld by the authority until the project is completed to their satisfaction. This payment is usually 10-20% of the total contract amount and is held in escrow until the completion of the project. A retention payment is used to ensure that the contractor is motivated to complete the project on time and to the specified standards. In summary, a retention payment is a portion of the total contract amount that is withheld by the authority until the project is completed and is used to ensure that the contractor is motivated to finish the project to the specified standards.

Footnotes

Interim certificate — recommended articles

Certificate for payment — Certificate of substantial completion — Retention money — Reliance letter — Consent order — Credit memorandum — Unearned premium reserve — Unearned Premium — Commencement date

References

• MacRoberts (2014), "MacRoberts on Scottish Construction Contracts", John Wiley & Sons, India, Vol. 3
• Ndekugri I., Rycroft M. (2012), "The JCT 05 Standard Building Contract Law and Administration", Routledge, UK, Vol. 2
• Ramus J., Birchall S., Griffiths P. (2006), "Contract Practice for Surveyors", Routledge, Italy, Vol. 4

Author: Angelika Guzik