There is nothing in NZS3910, SA2017 or the CCA that requires us to calculate our claims on a “value to date basis”, less a previous value = the amount due for this period. These rule books are singularly focused on identifying the amount due for the period, not specifically how it is calculated. When we customarily use the ‘value to date’ method of calculation, timely information is needed (particularly for subcontractors), so this common calculation method produces an accurate claimed amount due value, every month.
The Established ‘Claimed to Date Value’ Convention
Head Contractors claim at the end of the month, for that month, on a “value to date basis”, less a “previous value” = the “amount due” for this period.
But there are three choices for the “previous value” to be deducted from the “value to date”, and they are;
[1] Less ‘previously claimed’;
[2] Less ‘previously scheduled’;
[3] Less ‘previously paid’.
#3. ‘Previously Paid’ commonly used by the Head Contractor
The Head Contractor is usually paid around the 25th of the month. So, at end of the month claim time, it is easy for them to calculate an amount due for the next payment claim, by claiming the value of work completed to date, less the value previously paid = the ‘Amount Due’ for the period. It will produce the same result as using ‘Previously Scheduled’, unless the Principal does not pay an amount scheduled when due. Usually, the Principal pays the scheduled amount and worrying about using ‘Previously Paid’, instead of the more reliable ‘Previously Scheduled’, rarely becomes a problem to administer. But if the Principal did not pay a scheduled amount, the Engineer would respond by not scheduling the same payment ‘again’ because it has already been scheduled as due, and having two schedules certifying the same amount twice could lead to an injustice if both schedules were enforced for payment through the CCA and court processes for enforcing a debt due. The Engineer achieves this by using the Previously Scheduled method.
#2. ‘Previously Scheduled’ is commonly used by the Engineer to the Contract.
The Engineer to the Contract, (The Engineer), has little choice but to schedule an amount due for the period on the basis of gross scheduled value to date, less previous scheduled value to date = the scheduled amount due for the period. If the amount paid is less than the amount scheduled, the contract has mechanisms for resolving late payment of scheduled amounts due.
#1. ‘Previously Claimed’ under sells the amount claimed value
Deducting the ‘Previously Claimed” amount is the least popular method of calculating the ‘Payment Claim amount Due’, owing to it leaving unclaimed any previously uncertified amounts, that may now be agreed as payable. It is important to know that it is not illegal to fail to issue a payment schedule, if you pay the ‘Amount Claimed as Due” by the due date for payment. Therefore if a Payment Claim is underclaimed, there is no penalty for the payer, not correcting this with a payment schedule, and just paying the amount claimed when due. Contractors use ‘Previously Claimed’ values in accounting systems all the time to incrementally record claimed liabilities issued and received. So, while useful for accounting purposes, less ‘Previously Claimed’ is not very useful for getting paid well.
Bending time around Subcontractors Payment Information
Head Contractor payment claims = end of the month
Subcontractor payment claims = 25th of the month (1 week before last months payment schedule arrives)
Head Contractor receives Payment Schedule = 10th of the month
Subcontractor receives Payment Schedule = end of the month
Head Contractor receives Payment = 20 - 25th of the month
Subcontractor receives Payment = end of the month
So, what does a subcontractor deduct from a payment claimed to date amount to determine the amount of the next Payment Claim? The same three choices;
[1] Less ‘previously claimed’; - not great for cashflow when resolving agreements on variations & previously overclaim deductions not being reinstated.
[2] Less ‘previously scheduled’; - two months old, Amount claimed due will be twice the monthly value earned.
[3] Less ‘previously paid’. - two months old, Amount claimed due will be twice the monthly value earned.
The balanced Approach to the Monthly Payment Claim Timetable
1 – 10th of the month – Principal consultants prepare Head Contract Payment Schedule;
10th of the month – Head Contract Payment Schedule issued;
10 – 20th of the month – Head Contractor prepares Subcontractor Payment Schedule;
20th of the month (14 working days) Subcontractor Payment Schedule issued;
20th of the month Subcontractor new variation requests issued;
25th of the month Subcontractor payment Claim issued (calculated ‘less previously schedule’);
End of the month Head Contractor issues monthly Payment Claim.
Subcontractors deserve more timely information about payment claim matters requiring resolution. Everyone has to plan their cashflow, update their accounting system and produce regular accurate reports. A two month delay in reporting a monthly generated response is slow and unnecessarily inefficient.
Head Contractors must deliver Subcontractor Payment Schedules no later than 14 working days after the end of the month to which it relates (around the 20th of the month), as indispensable feedback needed to create the next accurate Subcontractor Payment Claim.
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“Celebrating 50 years of New Zealand Building Economist 1972 to 2021”
By Matthew Ensoll
FNZIQS. Reg.QS.
Editor New Zealand Building Economist.