Quantity surveying fundamentals: applications for payment

We continue our quantity surveying fundamentals mini-series with a focus on applications for payment.

This week’s topic is another area of the quantity surveyor role that could benefit from automation because of the number of data sources we use to prepare an application for payment. Imagine if the process was tech driven and our focus was on quality control, compliance and value add communication? Just a thought.

This is another wide subject area and could occupy more than a 5-minute bitesize article. However, as I am constraining these articles, and I will try and be concise to give those reading it some tips and ideas to think about.

The importance

Why do we do it? Yes, often compliance with the contract is the first answer, but that only scratches the ‘why’ surface. The preparation of an application for payment is more than an administrative process where numbers are mechanically put together and thrown over to the client’s quantity surveyor to do the same.

The application for payment, and corresponding payment notice you receive, drives the financial performance of the organisation you work for. It determines your next cash payment and, complying with IFRS accounting standards, determines what revenue you can recognise in the accounts.

If the project has incurred costs in the month which are your client’s responsibility under the contract then, as a quantity surveyor, it is your responsibility to make sure this is paid asap. If not, your cash and margin position will deteriorate until it is rectified. Your opportunity to do that is through the application for payment, and the longer you leave it, the harder it will get.

This is crucial to business performance and this is where quantity surveyors can make a difference by keeping the ‘cause and effect’ (when you spend the money versus when you recover it) tight. You will achieve this by persuading your client’s quantity surveyor to certify and pay.

The contract

For me, the first stage to persuading the client’s quantity surveyor to certify is to prepare your application for payment compliant with the contract.

You would be surprised how many NEC based applications for payments refer to variations and claims. Don’t fall into that trap. Use the terminology in the contract and be strict about it. I would even go as far as to align your summary page with the clauses of the contract that give you entitlement to payment for the contract sum and additional payment for changes.

In preparing your application for payment, you need to persuade the client’s quantity surveyor that you are contractually entitled to be paid the amount you have valued. When you submit your application for payment, ask yourself whether you have done enough to convince the client’s quantity surveyor that you are entitled to be paid the amount you are seeking.

An obvious one, but errors do happen so make sure you get the basics right. What does the contract say about how you are paid, when you are paid, and the basis on which the payment is calculated? Do you need to submit in a particular format or to a particular person? These finer details might not seem important, but they are easy to get right at the start and, if they are not right, then they might cause issues later down the track.

The most obvious issue is you may compromise your right to adjudicate in that month. This can be a wide area but getting the compliance basics right will help avoid that pitfall.

Supporting information

If you feel you have done enough to answer the entitlement question, the next hurdle to think about jumping is whether you are submitting sufficient supporting information to substantiate your valuation.

This means only one thing: records, records, records! Well, not just submitting lever arch files full of relevant and irrelevant documents. What you need to do is draw the lines between the amounts you are asking to be paid, and the supporting information you are submitting.

A simple example is a variation where you have added up hours on timesheets. Show that calculation and provide the timesheet records. Signpost the information so that the client’s quantity surveyor can follow it without thinking too hard.

Put the effort in here and go the extra mile, it will make a difference to the amount certified.

Communication, communication, communication

You have issued your application for payment, so that might be time to put your feet up and wait for the money to roll in? If only it was that easy! Now you need to communicate with stakeholders who are involved in your payment notice (client’s quantity surveyor, client representative etc), and even your own team (e.g. project manager) so that everyone is on message.

If appropriate, meet your client stakeholders before they issue their payment notice. Do a site walk, hold a meeting in the office, whatever it takes to tease out their concerns and get an opportunity to either persuade them you are right, provide further information to satisfy their concerns, or acknowledge their points and make a reassessment where appropriate.

Don’t be that person who waits for the payment notice to arrive and makes excuses. Get ahead of these issues so that there are no shocks in the payment certificate; that way you will maximise your payment.

Final account forecast

A simple, but sometimes overlooked, piece of information to include with the application for payment is a forecast final account. It tends not to be a contract requirement but is, for me, best practice.

What you are looking to do here is take a “no shocks” approach to your forecast final account. Think about your car service. When you pick up the car and someone tells you the price has gone up by 50%, the work has been done and you have no option but to pay or dispute. It’s poor client care, and we are better than that – get the bad news on the table and work with your client to manage the issues.

Ideally you should also ask your client to give its own view with the payment notice. That way both sides can see where things are headed and, if divergence occurs, these can be discussed and resolved.

Have those ‘little and often’ conversations rather than letting it all come out at the end.

Final reflections

Yet another whirlwind article, with a lot of ground covered.

Hopefully I have achieved my objective and giving you some food for thought. This might reassure you that you are on the right track, or it might lead you to think about tightening up and improving your process.

The main thing for me is that the article helps you stop, reflect, and think about continuously improving.

Where do we go next in the mini-series? There are so many directions this could move into, but let’s explore another staple of the quantity surveyor role: cost forecasting.

Look out for that one and, in the meantime, enjoy the rest of your week!

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