A TERM PAPER

ON

VALUATION AND CERTIFICATION 0F

BUILDING PROJECTS IN NIGERIA.

BY

FASIPE, ENIAYEJU .O.

(ARC/07/0958)

COURSE LECTURERS.

PROF. O. O. OGUNSOTE.

ARC. S. A. BOBADOYE.

ARC. A.J. AFOLAMI

ARC. OMALE.

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MAY 2013

ABSTRACT

Valuation and certification are two processes that corroborate each other with respect to building

construction project in Nigeria and to this effect they cannot be separated from each other

because one process leads to the other. Valuations and certification are often times issued

monthly in accordance to the progress of work on site. The focus of this paper is to examine

some salient issues with respect to valuation and certification of building projects in Nigeria.

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TABLE OF CONTENTS

Title page 1

Abstract 2

Table of contents 3

1.0 Introduction 4

2.0 Valuation of building works 5

2.0.1 Accuracy 5

2.0.2 Date 7

2.0.3 Extent of measurement 7

2.0.4 Preliminary items 8

2.0.5 Nominated subcontractor 9

2.0.6 Unfixed materials on site 9

2.1 valuations on insolvency 10

2.2 valuations of variations 10

2.3 Interim valuations 13

3.0 Certification and payment 15

3.1 Certificate issue under building contract 16

3.1.1 Interim certificate ` 16

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3.1.2 Practical completion certificate 16

3.1.3. Final completion certificate 17

3.2 Interim certificate and valuation 17

4.0 Conclusion and recommendation 18

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1.0 INTRODUCTION

Building construction project span across various discipline and profession such as

Architecture, Engineering, planning, surveying, project management, estate management and

property valuation. It is an activity that brought together all building professionals to function

under one umbrella industry known as the building construction industry. The building

construction operation involves a lot of processes, procedures and activities of which valuation

and certification happens to be part. Valuation is pre-requisite to certification especially when it

relates to method of payment to main contractor and it is often done monthly or in stages as the

case may be jointly by the quantity surveyor and the contractor by measuring physically work

carried out on site and material supplied, then work done and material supplied are cost against

the rate and schedule in the bill of quantities (BOQ). To this effect, the architect or the contract

Administrator issues a certificate known as the interim certificate for the amount due with

respect to the main contractor’s payment. The issuance of the interim certificate (certification of

work done so far for payment) is the certification aspect that comes after the valuation. In

addition, methods of valuation and major certificate issued under building contract project will

also be examined in this term paper.

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2.0 VALUATION OF BUILDING WORKS

As stated earlier, building valuation is jointly carried out by the quantity surveyor and the main

contactor based on work done and service of labour engaged as well as material, plants and

equipments supplied to the construction site either monthly or on basis of stages of work

progress. In the cause of a major building contact, an Architect or contract administrator is

invariably called upon to issue a series of certificate which must be issued in accordance with the

provision of the particular contract. In so doing, the Architect is under a duty imposed by law to

act fairly and impartially between the parties. Where a valuation certificate is required by the

contract, and certainly under JCT 80, its issue is a condition precedent to payment. If the

certificate is improperly withheld, particularly if the delay arises from any action by the

employer, entitlement to payment may be enforced in the absence of the requisite certificate. In

preparing valuation, there are some cogent items that must be put into consideration so as to

achieve a realistic valuation. Such items include accuracy, date, and extent of measurement.

Others include preliminary items, nominated subcontractors, and unfixed materials on site.

2.0.1 Accuracy

The valuation for certificate should be made as accurate as possible. The contractor is entitled

under the contract to value of the work done less a specified retention sum. If the valuation is

kept low the retention sum is in effect excessive. To contractor having a number of contracts in

hand, these excessive margins will mount up and demand additional capital. However, the client

must be prompted against the possible insolvency of the contractor, when the client might have

to meet extra expenses in employing another contractor to complete the work.

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2.0.2 Date

If, as is often the case, the contractor is entitled to certificate monthly, it will be found

convenient to arranged the date at the beginning of the contract: say, the last Friday of every

month. Sometime the date must be fixed to suit the client’s convenience, particularly when

payment is to be passed at a board or committee meeting held at fixed intervals, as every effort

should be made to reduce the interval between valuation and payment. It helps if the contractor

submits a valuation statement, but the responsibility is that of the surveyor. Nominated

subcontractors should be notified by the main contractor of the dates of valuation and be required

to submit statement by those dates.

2.0.3 Extent of Measurement

The extent to which measurement will be necessary in making valuation for certificate will

depend on the nature of the job and the stage it has attained. It may very often be possible to take

the priced bill, identify the items that have been done, and to build up a figure in that way. Some

item will, of course be partially done, and in that case a proportion will have to be allocated. At a

first valuation, for instance, there may be a little done beyond foundation, and to identify the

appropriate items in the bill should not be difficult. If it is agreed that the foundation is two-third

complete, then the amount can be easily calculated. When, however, it comes to the

superstructure it may be necessary to take approximate measurement, floors and roofs. In some

cases, to take measurements may involve excessive labour of the work, if it is practicable, to take

a proportion of a section of the bill; for example half the plumbing bill or a quarter of the

emulsion in the painting bill. When dealing with housing, where a large number of similar units

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are involved, it should be possible from the bill of quantities to arrive at an approximate value of

one house at a various stage, for example

Brickwork up to damp-proof course

Brickwork to first floor level, with joist

Brickwork to eaves

Roof on

Plastering and glazing complete

Door hung

Plumbing and fittings complete

Decoration complete

The volume for different type of the same size of house will not be sufficient to make a

difference for certificate purpose. The work done at any time can be valued by taking the number

of houses that have reached each stage, and pricing out from the schedule, allowing some cases,

perhaps, for half and quarter stage.

On project without firm bill of quantities the value of the work carried will be accessed through

measurement of work on site or on a straightforward project, by proportion of the individual

items on the tender summary.

2.0.4 Preliminary Items

Each valuation will take into account the pricing of the preliminary bill or preliminary items.

These may be a number of items separately priced, or there may be one total for the whole. They

may show in addition an allocation between fixed and time-related cost. Each priced item should

be considered and a fair proportion for each included. Site establishment/removal cost and time

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related cost should be considered separately. The prices for provision of offices, mess facilities

and storage unit could be split up into delivery cost, weekly rent and removal cost, and valuation

made accordingly.

2.0.5 Nominated Subcontractor

In building of a valuation from a priced bill, all prime cost sums for nominated subcontractors

should be omitted and dealt with separately later. The subcontractors’ claims will be taken one

by one and examined, and a suitable figure added for each. The surveyor should have received

either direct or from the Architect a copy of the subcontractor’s accepted estimate. This may or

may not be the same as that used for arriving at the prime cost sum when the bill was prepared. It

a good practice to notify each nominated subcontractor of the amount included in the surveyors

recommendation, though the Architect is required by to notify the subcontractors of the amount

included on the certificate.

2.0.6 Unfixed Materials on Site

Besides the value of work done, most form of contract allow payment to be made to the

contractor for unfixed materials brought to the site or where the standard form is used, stored

ready for the contract, though possibly subject to a higher rate of retention. The surveyor should

ask for a list to be submitted by the valuation date to be check on the site visit. On substantial

contracts, the list can be certified beforehand by the clerk of works, who has the necessary date

easily available.

2.1 VALUATION ON INSOLVENCY

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In the event of the contractor becoming insolvent, it is prudent to make a valuation of the work

executed by taking the necessary measurement of the work up to the stage at which work cease

or is continued by another contractor. The valuation prepared in this case will include unfixed

materials and plant, which the architect, or the clerk of work on the Architect’s behalf, will be

responsible for seeing that they are not removed from the site. The purpose of this valuation is to

ensure that all parties may be aware of the financial position of some estimate of money

outstanding to the insolvent contractor can be made.

2.2 VALUATION OF VARIATIONS

All variations, other than those for which a contractor’s schedule has been accepted under the

terms of standard building contract (SBC) clause 5.3, should be valued by the quantity surveyor

in accordance with the valuation rule of SBC clause 5.6. This clause prescribes five basic method

for valuation of all work executed by the contractor as the result of architect/contract

administrator’s instructions as to the expenditure of provisional sum and the execution of works

for which an approximate quantity is included in the contract bill and variation.

The method of valuation to be adopted by the quantity surveyor depends upon the nature of and

the condition under which it has to be executed. Each basic method of valuation and the nature of

the work to be which it is to be applied are summarized in table1 below.

Table 1: Description of work and method of valuation

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DESCRIPTION OF WORK METHOD OF VALUATION

1. Additional and substituted work that can

properly be valued by measurement and

where the work is of similar conditions as

and does not significantly change the

quality of the work set out in the contract

bills.

Work for which an approximate quality

is included in the contract bills and that

quality is reasonably accurate.

Omission of work set out in the contract

bills.

Measure in accordance with SMM7R. Value at

the rates and prices for the work set out in the

contract bill.

Allow for any percentage or lump sum

adjustment in the contract bills.

Allow for any addition to or reduction of

preliminary items of the type referred to in the

SMM7R (standard method of measurement-

review 7) section A except in the case of work

resulting from an institution as to the expenditure

of a provisional sum in the contract bills for

defined work

2. Additional or substituted work that can

properly be valued by measurement and

where the work is of a similar character

to work set out in the contract bill but is

not executed under similar conditions

thereto and or significantly changes the

quantity thereof.

Work for which an approximate quantity

is included in the contract bills and the

As in 1 above plus fair allowance for the

differences arising from work not being executed

under similar condition to and/or because the

variation changes the quality of the work of

similar character in the contract bills

quantity is not reasonably accurate.

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Any work executed under changed under

changed conditions as a result of a

variation, compliance with an instruction

as to the expenditure of a provisional sum

or the execution of for which an

approximate quantity is included in the

contract bills.

3. Additional and substituted work that can

properly be valued by measurement and

where the work is not of similar character

to work set out in the contract bills

Measure in accordance with SMM7R, value at

fair rates and prices

Allow for any percentage or lump sum

adjustment in the contract bills.

Allow for any addition tvalue of the prime cost o

or reduction of preliminary items of the type

referred to in the SMM7R section A except in

the case of work resulting from an institution as

to the expenditure of a provisional sum in the

contract bills for defined work

4. Additional or substituted work that

cannot properly be valued by

measurement

Provided that vouchers specifying the time spent

upon the works, the workmen’s names, the plant

and materials employed are delivered to the

Architect for verification not later than the end

of the week following that in which the work is

executed, value at the prime cost of such work

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calculated in accordance with the ‘definition of

prime cost of day work carried in under a

building contract’ issued by the royal institute of

chartered surveyor and the confederation or the

electrical contractors’ association, as appropriate

and current at the base date together with

percentage additions to each section of the prime

cost at the rate set out in the contract bills.

5. Work other than additional, substituted,

or omitted work or liabilities directly

associated with a variation that cannot

reasonably be valued by any other

method.

A fair valuation

Source: adapted from Aqua group Guide to procurement, tendering and contract administration

2.3 INTERIM VALUATION

Prior to the architect issuing an interim certificate, it is usually necessary for the quantity

surveyor to prepare an interim valuation. The main items to be considered when valuing the

work are:

I. Measured work, including preliminaries

II. Value of variation and extra

III. Value of nominated subcontractors’ and suppliers’

IV. Fluctuations where applicable

V. Retention sum and

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VI. Previous payment.

3.0 CERTIFICATION AND PAYMENT

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Certification of work carried out on site by the Architect or contract administrator comes

immediately after the valuation has been prepared by the quantity surveyor basically to cushion

the payment of the amount due to the contractor based on the work done to that effect. The

interim certificate is a typical replica of the statement stated above.

3.1 CERTIFICATE ISSUED UNDER BUILDING CONTRACT

There are other certificates issued with respect to building project such as practical completion

certificate, making good defects certificate, final completion certificate to mention but few. If the

architect is administering the contract he or she will issue a certificate at various stages in the

construction, which will normally trigger client payments to the contractor. Typically these are:

3.1.1 Interim certificate

Interim Certificates is the one that confirms that work has been carried out to the architect’s

satisfaction, as determined by visual inspection. These certificates will be used as authorization

for the next tranche of payment for the works (and will sometimes identify an amount of

retention from the full amount).

3.1.2 Practical completion certificate

Practical Completion Certificate transfers possession of the building to the client, and the

Making Good Defects Certificate trigger the release of the retention. The architect conduct an

inspection to ascertain the readiness of building to be handed over and as well generate a snag

list which includes defective works, outstanding works and testing of all electrical and

mechanical works. On correction of all snags, the certificate of practical completion is issued by

the architect.

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3.1.3. Final completion certificate

The Final Completion Certificate will only be issued when the architect is satisfied that there has

been full compliance with the contract. Soon as is practicable but before the expiration of the

period the length of which is stated in the Appendix from the end of the Defects Liability Period

(also stated in the said Appendix) or from completion of making good defects under clause 15 or

from receipt by the Architect of the documents referred to in clause 30.5.2 whichever is the

latest, the Architect shall issue the Final Certificate. The Final Certificate shall state:-

a. the sum o f the amounts paid t o the Contractor under interim certificates and the amount

named in the said Appendix as Limit of Retention Fund and

b. the Contract Sum adjusted as necessary in accordance with the terms of these

Conditions, and the difference (if any) between the two sums shall be expressed in the

said certificate as balance due to the Contractor from the Employer or to the Employer

from the Contractor as the case may be and subject to any deductions authorized by these

Conditions, the said balance shall as from 28 days after the issue of the said certificate to

be a debt payable as the case may be by the Employer to the Contractor or by the

Contractor to the Employer.

However, few small-scale domestic projects will use the type of building contracts which require

all of the above certification.

3.2 INTERIM CERTIFICATE AND VALUATION

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At the period of interim certificates named in Appendix, the Architect issue a certificate stating

the amount due to the Contractor from the Employer, and the Contractor shall be entitled to

payment thereof within the period for honouring certificates named in the Appendix.

If the Employer fails to honour an Architects certificate within the period stated in the Appendix

usually 28 days, the Contractor notwithstanding his other rights and remedies under this contract,

shall be entitled to receive additional payments stated in the Appendix for the period during

which the certified amount remains unpaid. The amount stated as due in an interim certificate

shall, subject to any agreement between the parties as to stage payments, be the total value of the

work properly executed and of the materials and goods delivered to or adjacent to the Works or

stored in any other location approved by the Architect in consultation with the Employer for the

use thereon less any amount which may be retained by the employer (as provided in clause

30.3 of standard form of building contract in Nigeria) and less any installment(s) previously paid

under these Conditions.

Provided that such certificate shall only include the value of the said materials and goods as and

from such time as they are reasonably, properly and not prematurely brought to the Works or any

other approved location and then only if adequately protected against weather or other casualties.

4.0 CONCLUSION AND RECOMMENDATION

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At the early consultation and ideas stage, it is notoriously difficult to attach an accurate

estimation of what the construction costs will be for any but the simplest building projects.

Market conditions may change, and in an area of, or at a time of, high demand for good builders,

tenders can come back much higher than originally forecast. Therefore the need for valuation

and certification of building work should be taken with a sense of seriousness by all the parties

involved since it is an important aspect that cannot be ruled out under building contract

administration.

RECOMMENDATION

Architects, quantity surveyor and contractors are expected to exercise reasonable skill and care

when carrying out their work. This means that they should be suitably qualified, have adequate

resources to meet the project’s requirements and the necessary proficiency to fulfil their

instructions satisfactorily. They should ensure they are informed and up-todate with guidelines

and statutory requirements relating to the project. A failure to exercise reasonable skill and care

is not necessarily an indication of either professional misconduct or incompetence.

REFERENCES

Christopher J. Willis and Allan A. (1994): practice and procedure for the quantity surveyor.

London, united kingdom. Blackwell scientific publications.

Ivor H. Seeley (1984). Quantity surveying practice. Houndmills,Basingstoke and London. The

Macmillan press LTD.

Mark Hackelt, Ian Robinson and Gray Statham (1990): The Aqua group guide to procurement,

tendering and contract administration. Davis Langdon. Blackwell publishing.

Nigerian Institute of Architects. (1990): Standard Form of Building Contract in Nigeria. Lagos,

Nigeria

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Emmanuel Adesanya TAIWO. (2010): Building laws, Contracts and Administration. Osun state,

Nigeria. Oyweck publishers.

Omotayo M. Babalakin. (2013): building contract administration-a paper presented to NIA PPE

(lagos zone).

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