Progress Claims

On the completion of this unit you will be able to: Coordinate and supervise the preparing of a progress claim Select an appropriate method for evaluating a progress claim Assess and verify a sub-contractors progress claim

Progress Claims
The aim of a progress claim is to claim for the progressively increasing value of work completed to date. There will be many progress claims during a project. On a job of short duration there may be only two or three payments claimed by a builder: First, maybe a deposit, secondly, a progressive payment for work complete to that point. finally, the total value of work completed. You can see why the middle or interim payment is called a progress payment.

Progress Claims
Who would prepare a progress claim: The progress claim is prepared by the builder and submitted to the proprietor. The builder may delegate the actual work of preparation to a building cadet, leading hand, general foreman or contract administrator. A progress claim would also be prepared by a subcontractor and submitted to the head contractor or builder. The subcontractor may also delegate actual preparation or gathering of information to a responsible employee. Regardless of who carries out the work, the same process is adopted as described in this section.

Progress Claims
Time for issuing a progress claim The claim would be completed ready for submission to the proprietor, or to the builder in the case of a subcontractor, at the time stated in the contract conditions. Often this is on the 28th day of the month, because every month has a 28th day. The contract conditions may state that where that day is either a Saturday, Sunday or public holiday, the progress claim should be submitted on the preceding working day.

Progress Claims
It is necessary to closely consult the contract conditions for this information. Usually a progress claim will be submitted once a month. This allows valuation of the whole of the work up to that point. The end of the month is a very convenient point in time to value completed work. The end of the month may coincide with the end of the financial or calendar year.

Progress Claims
In the housing industry it is common practice to agree on the completion of a stage of construction as the time for submitting a progress claim. It is also common practice to agree on the value of the claims prior to signing a contract. Appendix 2 HIA Residential Building Contract Item 13 Progress Payments Clause 12 In the housing industry many sub-contractors submit progress claims more frequently than monthly. This needs to be considered in the builders cash flow programme, as some payments will need to be made before the builder receives a progress payment from the client

Progress Claims
Information required for a progress claim:
There is much basic information required before cost information is required. Building companys name Proprietors name Project name and address Date Progress claim number.

Progress Claims
Building companys name The building companys name must be the same as that shown on the contract conditions. Some companies have a different trading name to the company namefor example, OTEN Building Pty Ltd trading as Strathfield Builders. Here, OTEN Building Pty Ltd is a legal entity recognised by the Australian Securities Commission (ASC) and the Australian Taxation Office (ATO). Strathfield Builders may be a registered business name, but does not have the same legal standing and should not be used.

Progress Claims

Proprietors name The proprietors name must always be used. If there is an architect supervising the project, you must still address the progress claim to the proprietor. In this instance the architect will be acting as the proprietors agent and will not be making payment. Therefore, address the progress claim to the person or company that will be making the payment and whose name appears as the other party on the contract conditions.

Progress Claims
Project name and address It is important to distinguish between similar projects. For example, the company could be upgrading two different premises in the same street. The reference number given to the project would help when entering project cost and payment details in a computer record. Date The date of preparation and submission should be shown to prove compliance with the contract conditions. Should there be any delay in payment, the date of submission can be seen for the possible calculation of interest on late payments.

Progress Claims
Progress claim number Showing the claim number distinguishes one claim from another. This allows quick reference to be made in communications. It is also useful in ensuring that payments to subcontractors are made from the correct claim. For example, if a subcontractors claim was included in the builders claim No. 12, no payment should be made to that subcontractor until payment for claim No.12 is received. This ensures that the builder does not overspend. Note in some instances the proprietor may request an affidavit stating that all payments have been made in relation to the claim prior to making the payment

Progress Claims

A sample of a progress claim form is at Appendix 3 of your learner guide

Progress Claims
Methods of assessing the value of work completed Work may be valued by a number of methods: Measure the work completed since the last progress claim. Measure the total work completed since the commencement of the works. Determine a percentage of each work item completed since the commencement of the works. Determine a percentage of large areas of the works since the works commenced.

Progress Claims
Methods of assessing the value of work completed Method 1 Measure the work completed since the last progress claim should be avoided, because it is often very difficult to establish where the work was measured to at the last claim unless drawings are kept, and colour or some other method has been used to mark in each new measurement.

Progress Claims

Methods of assessing the value of work completed Method 2 Measure the total work completed since the commencement of the works is very accurate but it is a long and time-consuming measuring exercise to establish a value. This is likely to be warranted in many circumstances where accurate payment for work is necessary.

Progress Claims
Methods of assessing the value of work completed Method 3 Determine a percentage of each work item completed since the commencement of the works is similar to method 2. This does not have the same degree of accuracy but requires substantially less time. This method is the most efficient methodtime is reduced and little accuracy is sacrificed. Experience is required to adequately assess percentages speedily but work missed in a previous valuation may easily by included.

Progress Claims
Methods of assessing the value of work completed Method 4 Determine a percentage of large areas of the works since the works commenced is very quick and should only be carried out by those with long experience of the trades involved. It is best used as a check of claims carried out by others (eg a clerk of works checking through a builders progress claim).

Progress Claims
Methods of assessing the value of work completed Method 5 Agreed value of stage complete This progress payment method is common to the housing industry. It requires a schedule of an agreed value to be paid at predetermined stages of construction, eg 30 % of the total construction value payable at the completion of the floor slab. See item 13 Appendix 2

Progress Claims
Methods of assessing the value of work completed Set-out of a progress claim The progress claim should contain three components: A covering letter The progress claim summary A complete breakdown showing detail of how the figures on the summary were achieved.

Progress Claims
Methods of assessing the value of work completed Set-out of a progress claim The progress claim should contain three components: A covering letter The progress claim summary A complete breakdown showing detail of how the figures on the summary were achieved.

Progress Claims

Methods of assessing the value of work completed

Check your progress: Answer the question in your learner guide

Preparing a progress claim

We have seen the general layout of the progress claim and the information it should contain. Now we will go on to discuss where that information is found and prepare a progress claim. Your client or the proprietor will want as much information as possible before a payment is approved. By providing all relevant information you will be answering all the proprietors questions. Any questions related to the progress claim details are likely to delay the payment to the builder.

Preparing a progress claim

Locating information and assessing Finding the information The information will generally be found: On the drawings In subcontractors progress claims to the builder.

Preparing a progress claim

For example, you may measure a slab in square metres and claim at dollars per metre. This measure may be made on site or from drawings. On the other hand, you may use your experience to determine that 50% of a work item is complete and therefore correct to include in the progress claim. Both of these methods may be sufficient to verify a subcontractors progress claim that you may the incorporate into the builders progress claim.

Preparing a progress claim

Assessing the quantity of work completed Since the value of the progress claim will be based on a quantity or percentage of work completed, we will have to assess the work by any of the following methods: Site measure Measure from drawings Bill of quantities. Agreed value of the stage completed

Preparing a progress claim

Site measure The work completed to date or since the last progress claim may be measured on site. This is slow and time-consuming but is the most accurate method of determining the quantity completed. This method may be used as a check on the bill of quantities provided by the proprietor at the time of tender.

Preparing a progress claim

Any discrepancies may become the subject of a variation, either positive or negative. (If the measure is of a particular subcontractors work, a representative of that subcontractor should assist in the measure. This rules out any argument regarding the accuracy of the measure by agreeing what should and should not be measured as the measure is carried out.)

Preparing a progress claim

The builder may use a site measure form for this purpose. Such a form signed by the builders site representative and a representative of the subcontractor will ensure no delay to a subcontractors payment from the builders office. Because both parties have signed it, it would be accepted as a signed delivery note (which in effect it is) by an accounts office. The site measure form would be based on the measurement paper an example is located at Appendix 4

Preparing a progress claim

Measure from drawings This may be speedier than a site measure but slightly less accurate. Discrepancies in the drawings are less likely to be found, because you will be using the same drawings as the quantity surveyor. In any case mark the drawings as you measure them. Make these drawings available to either your subcontractor or proprietor so that the basis for the claim is easily understood. A signature showing agreement is often useful proof for later dispute resolution.

Preparing a progress claim

Bill of quantities (BQ) A BQ lists or itemises all components and materials to be incorporated into the building works. This may be used to value completed work. As the builder you are likely to have a BQ priced by your estimator that totals to the contract sum. This is the priced BQ. You may claim for a percentage of each item as the work proceeds. The only skill you require is an ability to gauge just how much of a work item is complete. If it is a large item (such as 32 MPa concrete in slabs on ground to a shopping centre), it may be necessary to revert to measuring either on site or from the drawings. Most items however, will be smaller (such as 130-girth bitumen-coated aluminium dampcoursethis may be 25% or 50% installed.)

Preparing a progress claim

Bills of quantities provided by the client are not common to the housing industry. A bill of quantities is prepared as part of the estimating process by the builder. It is good practice to use this as a check on as built quantities.

Preparing a progress claim

What has been outlined is the best method to use where a BQ has been produced. This is especially true where the BQ is proprietor-prepared. It saves all arguments because only the quantity completed may be disputed, not the rate applied to it. The rate may form part of the contract agreement. If the proprietor has not prepared a BQ, it may be advisable to prepare one for tender and claim purposes for subcontractors. The cost is outweighed by the convenience and prevention of disputes.

Verification of subcontractors progress claims

Where a subcontractor submits a claim, you will need to verify its accuracy before you incorporate it into your claim or pay it. First you will need to know how the subcontractor valued the workjust as your proprietor will want to know the same from your breakdown sheet. Wherever possible take the time to go through a subcontractors claim with the subcontractors representative. This way all matters should be made clear. If they are not, the representative is on hand to answer all questions.

Verification of subcontractors progress claims

Examples of assessing completed work: In a situation where a bricklayer has submitted a progress claim, you could adopt any of the above methods. Measure completed work on site You could measure the completed work on site. But would you know for certain where the previous progress claim had been measured to? To solve this problem you could mark up in colour a set of elevation drawings. Use a different colour for each claim to separate the work.

Verification of subcontractors progress claims

Measure from drawings: You could measure from the drawings only and again mark the drawings for each claim. But to ensure no problems arise, it would be useful to have the bricklayer sign the drawing with the coloured area that represents this claim.

Verification of subcontractors progress claims

Assess from quantities delivered: You could assess the work completed by the quantity of bricks delivered. This would be easy, because you have the brick delivery notes. You would have to deduct the unlaid bricks on the site and a percentage for bricks wasted in cutting and those rejected as poor quality. This method is quick and should only be used for the first or second claim, and never for the final claim. It is too inaccurate for precise assessment of work.

Verification of subcontractors progress claims

Avoid overpayment: You should never let a situation arise where an overpayment or over-claim for work could exist. If you do, you could be overpaying a subcontractor who may not return to complete the works. You could also be claiming ahead to the proprietor for work completed. In this case you could receive your money ahead of time, which may appear useful but you may well have insufficient funds to complete the works at the end of the project. Both situations cause great financial danger.

Verification of subcontractors progress claims

Inclusion of unfixed materials: Some conditions of contract allow the inclusion of unfixed materials in a progress claim. These unfixed materials may be delivered to site, or off site but intended for delivery. This condition allows a builder or subcontractor to claim for materials that would otherwise be a significant cash-flow drainthat is, in a usual situation they may need to wait until the items have been fixed in place before a claim may be made. In the case of a structural steel fabricator, the cost of the steel would be a large financial burden to carry for possibly two months before payment could be expected. This contract condition allows the steel to be claimed for.

Verification of subcontractors progress claims

The detailed breakdown sheet and the summary sheet Set-out of the detailed breakdown sheet Table 1: Detailed breakdown sheet is included in your learner guide at page 13 Totalling by trade Each trade is totalled as its assessment is completed and transferred to the summary sheet. It is often sensible to round up or down to the nearest ten or hundred dollars. This depends on the size of the project. The final claim at the end of the project would not be rounded up or down, but will deal with precise amounts so that the contract is finalised to the last cent.

Verification of subcontractors progress sheet

The summary sheet: This shows only the total of each trade from the detailed breakdown sheets. The proprietor would only need to look at the detail sheets if there was doubt about the figures shown on the summary sheet (see Table 2 of your learner guide). Therefore it can be seen that all the detail is supplied to answer all questions that may arise to slow our payment. It is always best to adopt a policy of full disclosure so that trust between the builder and proprietor is built up.

Verification of subcontractors progress claims

The covering letter The covering letter would be typed on your company letter head paper. This would state the: Project name Date Number of the progress claim Value of the claim. This letter gives the most important information about the progress claim. If the proprietor requires further information, you will have attached it for easy reference. First will be the summary and the detailed breakdown sheets.

Verification of subcontractors progress claims

Check your progress 2 In your learner guide Complete the progress claim from the BQ showing percentages of work complete. Then check your answer against the one given at the end of this unit. Check your answers on page 17 and 18 of your guide

Conduct on Site Supervision of a building and construction project

Session 2 Progress payment certificate Contract variations Payment to contractors Retention funds Extensions of time Recording payments and costs