What belongs in an interim valuation

An interim valuation answers one question: how much of the contract sum has been earned at the valuation date. It is a payment on account. It is not an agreement of value, and nothing in it binds either party at the final account.

That framing decides most of the arguments about what goes in.

The components

Measured work

The proportion of the contract works properly executed at the valuation date, valued at contract rates. On a bill of quantities contract this is measured against the bill. On a lump sum contract with a schedule of activities it is assessed against activities completed.

The word doing the work is properly. Work that is defective is not properly executed and is not valued, however complete it looks. That is a judgement, and it should be recorded with a reason, because it is the judgement most likely to be revisited.

Variations

Variations that have been instructed and valued. The valuation rule used matters and should be recorded alongside the figure, not held separately in correspondence.

Where a variation has been instructed but not yet agreed, a fair assessment is generally included rather than nothing. Excluding instructed work entirely because the price is unagreed pushes the contractor into funding a change it was told to carry out.

Materials on site

Materials and goods delivered to and placed on or adjacent to the works, intended for incorporation, and reasonably and properly on site. Not prematurely delivered, not defective, and not stored somewhere they should not be.

Materials off site

Only where the contract permits it, and typically only for listed items with the conditions the contract sets: vesting, insurance, identification, sometimes a bond. Off-site materials are the single most common source of an interim overpayment that becomes visible only on insolvency.

Fluctuations

Where the contract provides for them. Under a fluctuations provision the adjustment is calculated by the mechanism the contract specifies, not estimated.

Loss and expense

Amounts ascertained under the contract's loss and expense provisions. The operative word is ascertained. A claim submitted is not an amount ascertained, and including an unascertained claim in a certificate is a decision that will be difficult to defend later.

What comes off

• Retention, at the rate the contract specifies, halved after practical completion
• Previously certified sums, so the certificate states the amount due this period
• Amounts properly deductible under the contract, such as liquidated damages where they have been correctly triggered by notice
• Advance payment recovery, where an advance payment has been made and is being recovered against the works

What does not belong

Anticipated work. Value what has been done at the valuation date, not what will plainly be done next week.

Unassessed claims. Delay, disruption and prolongation claims belong in the process the contract sets out for them.

Set-offs asserted without the contractual mechanism. Contra charges deducted without following the notice provisions do not become valid by being justified.

Round sum allowances. A figure entered to make the certificate feel right is a figure nobody can explain in six months.

Under-certifying is not the safe option

Client-side surveyors sometimes treat conservative certification as prudent. It is not neutral. Under-certification pushes the contractor into funding the works, worsens the relationship, and where it is systematic it invites exactly the notice arguments this blog spends a lot of time on.

The professional obligation, and the position taken across RICS Black Book guidance on interim valuations, is a fair assessment. Fair means neither party is funding the other. Not generous, not cautious. Fair.

The habit that makes this easy

• Value from the bill or activity schedule, not from last month's certificate plus a feeling
• Keep each component visible in the certificate rather than merged into a single figure
• Record the reason for anything excluded, at the time
• Treat materials off site as an exception requiring the contract's conditions to be met
• State clearly what is not included, so its absence is a decision rather than an oversight

A certificate built this way explains itself to the client, to the contractor, and to whoever picks the job up when you are on holiday. That last audience is the one worth designing for.