Materials on site, and the ones that are not

Everything else in an interim valuation is work that has been done. Materials are different: they are things that have been bought and not yet used. Certifying them means paying for value that is sitting on a pallet, and the contract sets conditions accordingly.

Materials on site

Typical JCT wording entitles the contractor to payment for materials and goods delivered to or adjacent to the works and intended for incorporation, provided they are not delivered prematurely and are adequately protected.

Each of those conditions does work:

• Delivered to or adjacent to the works. Not in a yard elsewhere, not on another site.
• Intended for incorporation. Plant, temporary works and consumables are not materials for this purpose.
• Not prematurely delivered. Fittings for a fit-out arriving during groundworks are a cash flow request dressed as a delivery.
• Adequately protected. Damaged or deteriorating materials are not properly on site.

Where these are met, the materials are valued and included. Ownership typically passes to the employer on payment, and the contractor becomes responsible for them until incorporation.

Materials off site

This is a different regime and it should feel like one. Off-site materials are only payable where the contract expressly provides for it, usually for listed items identified at tender, and usually subject to conditions such as:

• The items are set apart and clearly identified as belonging to the employer
• Ownership has vested, evidenced in writing, including up the supply chain
• The items are insured
• An off-site materials bond is in place, where the contract requires one

Why this matters most on insolvency

While a job is running, materials certification is a cash flow question and errors correct themselves as the work proceeds. On insolvency it stops being a timing issue and becomes a loss.

If a contractor fails after materials have been certified, the employer's position depends entirely on whether title actually passed. Where a supplier retained title because it had not been paid, the employer may find it has paid for goods it does not own and cannot take. That risk is highest for off-site materials, where the chain of ownership is longest and least visible.

The double payment trap

A quieter problem, and far more common than insolvency.

Materials are certified in month three. In month five they are fixed, and the measured work that incorporates them is certified. Unless the materials value is removed at the same time, the same money has been paid twice.

On a valuation built by adding to last month's figure, this is easy to miss, because nothing prompts the deduction. It surfaces at the final account as an unexplained overpayment, usually discovered by whoever is trying to close the job rather than by whoever created it.

The structural fix is to link the materials line to the bill item it will be incorporated into, so that certifying the work automatically extinguishes the materials value. Done that way the arithmetic cannot drift.

Practical points

• Inspect before certifying. A delivery note is evidence of a delivery, not of materials being properly on site
• Photograph what you certify, with a date. It costs nothing and settles arguments
• Keep a running schedule of materials certified and materials incorporated, so the balance is always visible
• Treat off-site materials as an exception requiring positive evidence, not a routine inclusion
• Check whether the contract requires a bond, and whether it is actually in place rather than promised

None of this makes certifying materials difficult. It makes it deliberate, which is the difference between a valuation you can defend and one that merely balances.