Final accounts: how to avoid disputes at the end of a build

The final account is where a build gets quietly signed off or turns into a fight, and which one you get is decided months earlier. Agree the cost of every variation in the month it happens, keep the records as you go, and settling the final account becomes a formality. Leave the whole reckoning to the end and you inherit an argument instead of an agreement.

We settle final accounts for a living, and the pattern rarely changes. The number in dispute was created long before anyone looked at it, on the day a wall moved, a specification changed, or a drawing arrived late and nobody wrote down what it would cost. By the time the contractor's Final Statement lands, both sides remember the same events differently and there is no contemporaneous note to settle it. So the honest way to avoid a row at the end of a build is to do the dull thing all the way through: value the work as it happens.

Do that, and the final account nearly writes itself.

What actually starts a final account dispute?

Four things, in the order we see them. Variations that were carried out but never formally instructed or priced. Provisional sums that ballooned once the real scope was known. Retention that quietly drifted past the date it should have been released. And a contract mechanism nobody read closely enough to follow.

The RICS guidance on final accounts says the same thing in politer language: agree as you go. A variation priced the week it is instructed costs what it costs. The same variation priced eighteen months later, from memory, becomes a negotiation. On a JCT Design and Build contract the contractor carries the design risk, which makes clear, dated instructions matter even more, because the line between design development and a genuine change is exactly where the money sits.

When does the final account have to be settled?

Sooner than most people think, and the clock is contractual. Under the JCT Design and Build 2016 contract the contractor must submit the Final Statement within 3 months of practical completion. The due date for the final payment then falls one month after the last of three events: the end of the rectification period, the submission of that statement, or the Notice of Completion of Making Good.

Here is the part that catches employers out. The Final Statement becomes conclusive unless you give notice that you dispute it before that due date. Miss the window and you can be bound by a number you never agreed. If you do dispute it in time, you have 28 days after the due date to start proceedings or adjudication on the point you are contesting.

How do you stop a variation becoming an argument?

Instruct it in writing before the work proceeds, and price it in the same breath wherever the programme allows. That is the whole discipline. When speed forces a change to go ahead before it is fully priced, agree a basis for the valuation on the day and record it: a dayworks rate, a percentage, a not-to-exceed figure. Anything written and dated beats a shared memory six months on.

The unpopular part of our job sits right here. We will hold an interim valuation until a variation is properly instructed, and some clients find that maddening when the trades are on site and the pressure is on. We do it anyway. A payment made against work that was never instructed is close to impossible to claw back at the final account, and holding the line is the single habit that keeps a Final Statement from turning into a fight.

This is the day-to-day of good cost management and quantity surveying: valuing the work honestly as it is built, so nobody is surprised at the end.

What happens to retention and defects?

Retention is usually 3% or 5% of each valuation, held back as security. Half is normally released at practical completion and the balance after the rectification period, once defects are made good. It is small money on paper and a frequent flashpoint in practice, because it is easy to forget and easy to withhold for longer than the contract allows. Diarise both release dates when the contract is signed, not when someone finally chases.

What if you genuinely cannot agree?

Then you adjudicate, and the law is built to get it resolved fast. The Housing Grants, Construction and Regeneration Act 1996, the Construction Act, gives either party the right to refer a dispute to adjudication at any time. The adjudicator has 28 days to decide, extendable by 14 with the referring party's consent. NEC4 contracts add a step first under Option W2, where Senior Representatives try to settle the matter before it goes further.

Adjudication works. It is also blunt. A decision in 28 days on a complex final account is rough justice by design, and you can win the point you argued while losing the one you had no time to prepare. We would rather never use it. Every hour spent agreeing variations during the build is an hour you do not spend explaining them to an adjudicator afterwards.

Why Greater Manchester's building stock makes this harder

A lot of the work around Stockport and the wider Greater Manchester regeneration is refurbishment rather than new build. Mill conversions, warehouse reuse, the Victorian brick and timber going back into service across schemes like Stockport's Town Centre West. You cannot fully survey a 150-year-old structure until you open it up, so hidden conditions are guaranteed, and every one of them is a variation waiting to happen. The projects that settle cleanly share one habit. Every surprise was instructed and priced the day it appeared.

We will also admit where administration cannot save a project. When we are brought in late, after a contract has been let on a design that was only part finished, the variations are effectively baked in before we arrive. Good record keeping softens the damage. It does not undo a weak start. We would always rather be involved before the contract is signed, while the scope can still be tightened and the risk priced properly.

Getting a final account to land where it should is not luck. It is a hundred small decisions made and written down while the build is live. If you want that discipline on your project from the start, through construction project management and independent project monitoring and auditing, talk to us before the next valuation is due.