Interim certificate
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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 [1].
Important issues
Below are some interesting facts [2]:
- 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 [3].
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 [4]:
- 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" [5];
- 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" [6].
Footnotes
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
