BAB 3

INTERIM PAYMENT

3.1 : INTRODUCTION

1. Methods of payments to contractor normally determined by the size of jobs.

Small jobs : Contractor will be paid on completion of the job i.e.

only 1 payment involved.

Big jobs : Contractor is to be paid in instalmens i.e. many

payments are made until the whole contract sum is settled.

2. Interim payments – all payments made to the contractor other than the final

payment. These payments are made during and after the contract period until the

issuance of final payment.

3. During Construction – the contractor is entitled to interim payments at regular

interval in accordance with a proper evaluaton of the work done and materials

supplied i.e. the contractor receives regular payments as the work progresses.

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4. After completion – the interim certificates are not subjected to monthly interval.

5. There should not be any large amount outstanding to the contractor after completion

and payments within this period mey be required:

a) To release retention sum (where applicable),

b) For final evaluation of variations,

c) Settlement of an account for loss and expenses,

d) N.S.C.’s and N.S.’s accounts.

3.2 : P.W.D. FORM 203A (Rev. 2007)

1. The relevant contractual provisional regarding interim payments are as

shown in Table 1.

P.W.D. FORM 203A (Rev. 2007)

Clause 20.0 : Unfixed materials and goods

Clause 28.0 : Payment to contractor

Clause 30.0 : Fluctuation of price

Clause 33.0 : Deduction from money due to contractor

Clause 34.0 : P.C./ Provisional sums

Clause 40.0 : Damages for non-completion

Clause 60.0 : Payment for Nominated sub-contractors or Nominated

supplier

Table 1 ; Contractual provisional

2. The above Clauses explain the procedure to be adhered to in the payment

process which include:

a) The timing of payments to the contractor.

b) The amount to be paid to the contractor.

c) The right of set-off by the employer.

d) The enforcement of payment.

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e) The procedure and conditions precedent.

3.3 : PROCEDURE OF CERTIFICATION

Figure 1: Interim payment process.

3.4 : CONTRACTOR’S APPLICATION

1. The submission of payment application by the contractor is not

mandatory under the contract. The S.O. has to make valuation for

interim payment even though contractor does not submit his claim.

2. However, contractor normally submits his claim for work done and

materials on site to help speed up the valuation process. The claim is

n the form or BQ or Summary in the tender.

3. S.O./ Consultant to check and approve the application. Consultant

also to certifyin writing that the work is in accordance to contract.

4. For administrative purposes, it’s good to agree on the specific date of

each month for the submission of the application.

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Progress claim submitted by contractor.

Valuation prepare by S.O.

Certification by S.O.

Payment made by employer

5. The application shows the estimated value of work done by the

contractor and should be presented in an approved format.

6. The contractor should include everything that he thinks he entitled to

be paid in his application since the claim is going to be the basis of

the evaluation.

3.5 VALUATION

3.5.1 Generally

‘When the contractor has executed work including delivery … of any unfixed

materials or goods intented for use thereon … the S.O. at that time make the first

valuation of the same.’ (Clause 28.)

1. The S.O. has to make interim valuation in order to arrive at the

amount due in interim certificates.

2. The evaluation is for the work properly executed and materials

delivered on site.

‘Thereafter, once (or more often at the discretion of the S.O.) during

the course of each succeeding month the S.O. shall make a fair

valuation …’ (Clause 28.2)

3. The evaluation is to be carried out at least once a month.

4. In practice, the S.O. and the contractor have to agree on specific dates

or days of the month to carry out the valuation work.

5. The evaluation should be as accurate as is reasonably possible and is

subject to the month to carry out the valuation work.

6. A new evaluation of the work done provides an opportunity to adjust

or modify previous evaluations of earlies certificates.

7. No interim certificate is final and conclusive and is subject to

adjustment in subsequent interim certificates and final certificate.

8. The value of work executed consists of preliminaries and permanent

work done by the contractor.

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3.5.2 Preliminaries

1. This section consists of those items that do not form part of the

permanent works but are essential to be provided for the successful

completion of the job.

2. The employer and the contractor should agree on the method of

paying for the preliminaries items at the beginning of the contract.

3. Valuation is only made on the items that are priced and carried out by

the contractor.

4. The price of each item may be broken down and categorized as initial

cost progressive cost or completion cost to the employer.

5. Initial cost – a lump sum to be paid to the contractor in the first

interim payment.

6. Progressive cost – a continuing cost to be spread throughtout the

execution of the work and either related to the time or to the

expenditure on the work.

7. Completion cost – a lump sum to be paid to the contractor upon

completion the work.

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Example for calculation of payment for Preliminaries

Table 2 shows an example of breakdown of the preliminaries items.

The total amount of RM 361,700.00 in coloum ‘Initial’ to be paid in the first

interim payment.

The total amount of RM 33,100.00 in coloum ‘Comlpetion’ to be paid in the last

regular interim.

BQ REF. DESCRIPTION TOTAL INITIAL PROGRESSIVE COMPLETION

D/11/A Temporary roads

Temporary office

Signboards

Light & power

Water for the works

Contractor’s equipment

Site telephone

Temporary hoardings

Work programme

Cash flow estimate

Progress report

Progress photographs

Shop drawings

Site meetings

Interim certificate claims

Testing & apparatus

Maintenance on public roads

Safeguarding the works

Keeping site clear

Clearing site on completion

Setting out

Contractor’s superintendence

Workmen’s compensation

10,000.00

18,000.00

2,000.00

10,000.00

15,000.00

300,000.00

8,500.00

28,000.00

20,000.00

5,000.00

2,000.00

6,000.00

2,000.00

3,000.00

2,000.00

5,000.00

3,000.00

30,000.00

50,000.00

15,000.00

20,000.00

240,000.00

75,000.00

7,500.00

14,000.00

1,700.00

1,000.00

3,000.00

50,000.00

500.00

20,000.00

1,000.00

1,000.00

-

-

-

-

-

2,000.00

-

-

-

-

15,000.00

-

75,000.00

1,500.00

3,500.00

200.00

8,500.00

11,500.00

240,000.00

7,500.00

5,000.00

19,000.00

4,000.00

2,000.00

6,000.00

2,000.00

3,000.00

2,000.00

3,000.00

3,000.00

28,000.00

50,000.00

-

5,000.00

240,000.00

-

1,000.00

500,00

100.00

500.00

500.00

10,000.00

500.00

3,000.00

-

-

-

-

-

-

-

-

2,000.00

-

15,000.00

-

-

-

-

TOTAL 1,049,500.00 361,700.00 654,700.00 33,100.00

Table 2: Breakdown of Preliminaries

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The total amount of RM 654,700.00 in coloum ‘Progressive’ to be paid

progressive during the execution of the works and can be done in 2 ways:-

a) Pro-rata on contract period :

Assumptions: Contract period = 24 months

Progressive payment = RM 654,700.00 = RM 27,279.17 / Month

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Amount of Preliminaries items to be paid:

Payment No. 1 = RM 361,700.00 + (654,700.00 x 1) = RM 388,979.17

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Payment No. 2 = RM 361,700.00 + (654,700.00 x 2) = RM 416,258.33

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b) Pro-rata on the value of work executed

Assumptions:

Contract sum = RM 25,000,000.00

Provisional sums = RM 1,500.000.00

Preliminaries = RM 1,049,500.00

Net contract sum = RM 25,000,000.00 – (RM 1,500.000.00 + RM 1,049,500.00)

= RM 22,450,500.00

% of progressive cost to net contract sum = RM 654,700.00 x 100

RM 22,450,500.00

= 2.91619 %

Amount of Preliminaries items to be paid:

If net value of work executed by contractor to date = RM 900,000.00

Progressive payment = RM 900,000.00 x 2.91619 % = RM 26,245.717

3.5.3 Value of the permanent works executed

Only the value of work properly executed by the contractor in accordance with

the contract must be included in the certificate – Townsend v Stone Toms &

Partners (1985).

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‘the amount stated as due in an interim certificate shall, subject to any

agreement between the parties as to payment by stages, be the estimated total

value of the work properly executed …’ (Clause 28.4)

a) Valuation based on Contractor’s work executed

The valuation calculates the estimated value of work executed by reference

to:

i. The detailed quantities and rates for every items in the bills of

quantities as in Table 3.

B.Q REF DESCRIPTIONS TENDERED

AMOUNT (RM)

PERCENTAGE OF

WORKDONE (%)

AMOUNT OF

WORKDONE (RM)

D/1/A

D/1/B

D/1/C

D/1/0

D/2/A

D/2/B

D/2/C

D/2/0

D/3/A

D/3/B

D/3/C

W.B.L.F.F

Excavation

To red. lev.

For pile cap n.e. 1.00m dp.

Ditto 1.00 – 2.00m dp.

Grd. Bm. n.e. 0.50m dp.

Hardcore

Conc. Gr. 15

Lean conc. to pile cap

Ditto to grd. bm.

Conc. Gr. 30

Pile cap

Col. Stump

Grd. bm.

bed

900.00

10,900.00

5,520.00

1,890.00

2,850.00

3,248.00

8,690.00

125,080.00

7,695.00

32,631.00

53,852.00

100.00

100.00

100.00

90.00

30.00

100.00

100.00

100.00

100.00

25.00

0.00

990.00

10,900.00

5,250.00

1,701.00

855.00

3,248.00

8,690.00

125,080.00

7,695.00

8,157.75

0.00

Total Carried Forward 172,566.75

Table 3: Valuation besed on measured items.

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ii. The cost of elements or work sections as in Table 4.

ITEM DESCRIPTIONS TENDERED

AMOUNT (RM)

PERCENTAGE OF

WORKDONE (%)

AMOUNT OF

WORKDONE (RM)

A

B

C

D

E

F

G

H

J

K

L

M

N

P

W.B.L.F.F

FRAME

UPPER FLOOR

STAIRCASE

ROOF

EXTERNAL WALLS

INTERNAL WALLS

WINDOWS

DOORS

INT. WALL FINISHES

INT. FLOOR FINISHES

INT. CEILING FINISHES

EXTERNAL FINISHES

MECHANICAL &

ELECTRICAL WORKS

25,400.00

31,900.00

18,250.00

5,890.00

20,850.00

9,500.00

3,240.00

8,500.00

5,400.00

12,690.00

22,200.00

13,850.00

15,800.00

58,000.00

100.00

95.00

90.00

90.00

30.00

35.00

30.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

25,400.00

30,305.00

16,4250.00

5,301.00

6,255.00

3,325.00

972.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

TOTAL261,470.00 - 87,983.00

Table 4 : Valuation based on elemental cost

iii. The contract sum

This only suitable for small jobs and to be done by experienced

staff only.

The amount of done is calculated by multiplying the estimated

percentage completion with the contract sum.

Example:

Amount of work done = 25% x RM100,000.00 = RM 25,000.00

Where 25% is the percentage of work completed and RM

100,000.00 is the contract sum.

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b) Valuation based on stage of completion

i. This is an alternative method of valuing the work executed by the

contractor.

ii. Interim payment to be made on the basis of percentage

completion of the various components of the project.

iii. An example of breakdown of works for stage payment for a

residential building is as shown in Table 5.

BREAKDOWN OF CONTRACT SUM

ITEM

S

STAGES OF WORKS

PERCENTAGE OF

CONTRACT SUM

1 Foundation and ground floor 15 %

2 Reinforced concrete frame, staircases and upper floor 20 %

3 Walls including doors and windows 15 %

4 Roofing, electrical wiring and plumbing 15 %

5 Finishes 15 %

6 Roads, drains and sewerage works 20 %

TOTAL 100%

Table 5 : Schedule of breakdown of contract sum.

iv. The detail of breakdown of works and the percentage of

payment to each stage of work will be decided by the employer

and attached to the tender document or as agreed by both the

employer and the contractor before the signing of the contract.

v. The amount to be paid to the contractor for the work

executed is equal to the value of the percentage of the contract

sum assigned to the work.

vi. In some arrangement, materials on site are not considered

for payments.

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c) Percentage Adjustment

‘The Govermentreserves the right to adjust the prices and rates in the Bills of

Quantities … to ensure their reasonableness before acceptance of tender…’

(Clause 26.2)

‘Any adjustment of the prices and rates in the B.Q. required … above and any

arithmetical error or omission in the B.Q. shall before signing of the contract be

so rectified and adjusted that when correctly calculated, the total amount in the

summary of the B.Q. shall represent the same amount as the tender amount in

the Form of Tender ...’ (Clause 26.3)

i. Before the signing of contract document – the S.O has to check the

contract document and make adjustment or corrections to:

a) Unreasonable and inconsistent rates

b) Arithmetical error in the pricing by the contractor.

ii. Normal sources of errors:

a) ‘Extension’ e.i. multiplication of rates and quatities.

b) Adding up the total of each item on each page of B.Q.

c) Transferring the total on each page to Collection.

d) Transferring the total from Collection to Summary.

e) Transferring the total from Summary to Form of Tender.

iii. Correction has to be made to avoid mistakes in the computation of

interim payments.

‘… The tender amount shown in the Form of Tender shall remain unaltered

but the nett aggregate amount of the difference ..., shall be calculated as a

percentage of the total adjusted amount shown in the summary of the B.Q.

and all prices and/ or rates throughout shall be subject to such percentage

discounts or premiums as the case may be. Provided always that Provisional

and P.C sums shall be excluded from such calculation and shall not be

subject to such percentage discount or premium.’ (Clause 26.3)

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iv. The original contract sum in the Tender Form must not be changed.

v. The S.O. has to calculate the percentage of the difference between the

tender sum and the corrected tender amount.

Example of the calculation of percentage adjustment

A. TOTAL AMOUNT as tendered RM 1,000,000.00

B. TOTAL AMOUNT as corrected RM 950,000.00

C. ERROR RM 50,000.00

B. TOTAL AMOUNT as corrected RM 950,000.00

Less Total Provisional Sums RM 100,000.00

D. TOTAL for Builder’s Works as corrected RM 850,000.00

E. PERCENTAGE ADDITION / OMMISION = C X 100 D 1

= 0.058823529% X 100 1

=5.8823529%

ADDITIONAL/OMISSION

If Tender amount > Corrected amount = + percentage adjustment

If Tender amount < Corrected amount = - percentage adjustment

vi. The amount to be paid to the contractor in the interim certificate is

subjected to the percentage adjustment.

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Example of application of percentage adjustment in interim payment:

Example 1:

Assumptions:Value of work executed by the contractor(Preliminaries + building work + external work) = RM 500,000.00Percentage adjustment = + 5.8823529%

Value of work executed = RM 500,000.00 Add percentage adjustment= RM500,000.00 x 0.058823529 = RM 29,411.76Amount to be paid = RM 529,411.76

Example 2:Assumptions:The work is 100% completed.

Value of work executed = RM 850,000.00Add percentage adjustment= RM 850,000.00 x 0.058823529 = RM 50,000.00Amount to be paid = RM 900,000.00

d) Variations

i. This is for the value of work which is not part of the original scope of

work but has been carried out by the contractor as the result of the

S.O.’s instruction.

‘The amount of variations shall be certified by the S.O. and added to or deducted

from the contract sum …’ (Clause 25.3)

ii. The value of variation work must also be included in the variation of

permanent work executed by the contractor.

iii. The value so considered for payment includes the variation work

where variation certificate is not yet prepared.

e) Nominated Sub-contractors Works

i. The methods of valuation of works done by Nominated sun-

contractors are similar to that for main contractor.

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3.5.4 Materials On Site

a) Generally

i. The contractor is entitled to payment for all unfixed materials

delivered to site but not yet incorporated in the work.

‘Unfixed materials and goods delivered to … Site … shall not be removed except

for use upon the works, unless the S.O. has consented in writing to such removal

…’ (Clause 20.0)

ii. Materials brought to site for the work must not be removed out of the

site without the S.O. consent.

iii. Materials which have been paid belong to the employer but the

contractor is still responsible for their safety.

iv. Materials not intended for the work must not be brought to site and

the S.O. instruct the contractor to remove those materials from site.

b) Prerequisite for payment

‘…value of the unfixed materials and goods deliverd to or adjacent to the site

intended for incorporation into the permanent works … such certificate shall

only include the value of the said unfixed materials and goods … they are

reasonably and properly and not prematurely delivered to or adjacent to the site

and adequately protected against weather, damage and deterioration.’

(clause 28.4)

i. Unfixed materials may be considered for payment if they are:

- Delivered to site or adjacent to site.

- Intended for incorporation in the permanent works i.e. in

accordance with the contract.

- Reasonably, properly and not prematurely brought to site.

- Adequately protected against weather and other casualties.

ii. The contractor also needs to obtain adequate title to the goods which

he pass on to the employer i.e. payment should be made to rightful

owner.

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iii. The costc of the materials must have been paid by the contractor to

the supplier.

c) Computation of valuation

i. The materials are priced at invoice prices i.e. the actual price paid by

the contractor to supplied and the price should be reasonable and

based on market price.

‘The amount stated as due in an interim certificate shall, …up to 90% to the

value of the unfixed materials and goods delivered to adjacent to the site

intented for incorporation into the permanent works up to and including the

date the valuation was made …’ (Clause 28.4)

ii. The amount to be paid to the contractor is 90% of the value of

materials.

iii. The type and quantity of materials must be in accordance to contract

– as stated in Specification, shown on drawings, described in B.Q.

etc.

iv. Only total value of materials available on site on the date of

valuation considered for payment.

‘… unfixed materials and goods which are supplied and delivered by Nominated

suppliers for which payment should be made for the full value …’ (Clause 28.5)

v. Materials supplied by Nominated suppliers are to be paid in full.

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3.5.5 Fluctuation of Price

‘… the amount payable by the Government to the Contractor upon the issue by

the S.O. of an interim certificate … shall be increased or descreased accordinglt

…’ (Clause 30)

i. The changes in cost of materials due to the market conditions must

be taken into account in the interim payments.

ii. Objective – to reduce risk of contractor as result of price increase by

compensating contractor for the increase during contract period.

iii. Price adjustment is made through the application of indices which

are issued by the Department of statistics in a formula.

iv. The calculation of the amount of fluctuation in price is to be made

monthly.

v. Base index figure is the index figure for the month the tender closes.

This index is to be inserted in Appendix B of the contract provision

before signing of the contract.

vi. Current index is the index figure for the month preceding the date of

the month of valuation.

Amount of Addition/Omission = Fluctuation factor x Effective value of

workdone

Fluctuation factor = Recovery factor x (Current index figure – Base index figure)Base index figure

Effective value of work done = Builder’s work – Preliminaries items

Recovery factor = 0.61 i.e. estimated material cost is 60% of the total cost of work.

Builder’s work = Total value of work done – (P.C. Sums + Provisional Sums)

*Addition/omission : quatity for the month x (previous price – current price)

(steel)

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3.5.6 Performance Bond

‘The contractor shall, on the of the possession of site, provide a Performance

bond … issued by an approved licensed bank or financial institution

incorporated in Malaysia in favour of the Government for a sum equivalent to

five percent (5%) of the total contract sum … to secure the due performance of

the obligations under this contract by the contractor …’ (Clause 13.1(a))

i. A performance bond is an agreement between the Government, the

contractor and a third party i.e. a bank or an insurance company.

ii. The third party here agrees to pay a sum of money to the

Government in the event of non-performance of the contract by the

contractor.

iii. The performance bond must be for an amount 5% of the contract

sum.

‘… the Government shall make a payment to the contractor as

follows:

(a) Where the Performance Bond is in the form of a Banker’s,

Insurance or Finance Company Gurantee, payment shall be

made on the amount certified as due to the contractor in the said

interim certificate; …’ (Clause 28.6(a))

iv. The contractor will be paid the whole amount certified as payable to

him in the certificate as no money will be retained by the employer.

3.5.7 Performance Guarantee Sum

‘The contractor may opt for Perfomance bond in the form of Performance

Guarantee Sum … whereby deductions of ten percent (10%) shall be made from

the first interim payments and subsequent interim payment until the total

amount deducted aggregate to a sum equivalent to five percent (5%) or the

Contract Sum…’ (Clause 13.2)

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i. This is an alternative form of guarantee for non-performance of

construction contract.

ii. The gross value of work done and materials delivered as ascertained

in the certificate is subject to deduction for Performance guarantee

sum.

iii. The deduction of 10% is made in every interim payment certificate.

Only 90% of the amount certified as due to the contractor will be

paid to him.

iv. The deductions must stop when the accumulated amount retained

reaches its limit of 5% of the contract sum.

3.6.8 Liquidated Damage for Delay

‘Upon the issuance of the Certificate of Non-Completon, the Government

shall be entitled to recover from the Contractor Liquidated and Ascertained

Damages calculated at the rate stated in the Appendix from the period of the

issuance of the Certificate of Non-Completion to the date of issuance of the

Certificate of Non-Completion to the date of issuance of Certificate of

Practical Completion or the date of termination of this contract. The S.O.

may deduct such damages from any money due or to become due the

Contractor …’ (Clause 40.2)

v. Liquidated and ascertained damages is a pre-estimate of a certain

sum of money to be paid as compensation if a breach actually takes

place.

vi. The amount is fixed and stated in Appendix to the Conditions of

contract.

vii. The contractor has to pay liquidated damages to the employer

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3.7 CERTIFICATIONS

3.7.1 Generally

a) Taken Construction Co. Ltd. V Charlton Estates Ltd (1973) laid out that a

certificate in the expression in a definite form of opinion by the S.O. regarding

some matter according to the contract.

b) Wording such as ‘The amount stated as due in an interim certificate ...’ (Clause

28.4), and ‘... and interim certificate stating the amount due to the contractor ...’

(Clause 28.3) imply that certificates are required to be in writing.

c) The S.O. is responsible to certify to the Employer the amount of payment

payable to the Contractor within 14 days from the date of the valuation.

d) Content of an interim payment:

i. Value of work done (Clause 28.4)

ii. Value of materials on site (Clause 28.4)

iii. Fluctuation of prices (Clause 30)

iv. Variation works (Clause 25.3)

v. P.C and Provisional sums (Clause 60)

vi. Contractual claims (Clause 44)

e) The deduction are made for:

i. Previous payments made (Clause 28.4)

ii. Performance guarantee sum (Clause 13.2)

iii. Recoupment of advance payments (Treasury Instruction 11/1981)

iv. Liquidated and ascertained damages (Clause 40.2)

v. Other permitted deductions – payments to other contractors making good

defects (Cl. 48.2), default in payments of wages (Cl. 23.5), ect...

‘... the S.O. shall issue an interim certificate ... PROVIDED THAT the signing of this

contract shall not be a condition precedent for the issue of the first interim certificate

(and no other) so long as teh contractor has returned the Letter of Acceptence duly

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signed and has deposited with the S.O. ... the relevent insurance policies ...’ (Clause

28.4)

f) First interim certificate can be issue even before signing of contract provided the

contractor deposited with S.O.:

i. Signed L.A.

ii. Public liability insurance and insurance of work.

g) For Government contracts, 3 interim certificates can be issued within 4 months

after the issuance of Letter of Acceptance even before signing of contract –

Treasury circular 10/1995.

‘NO certificate of the S.O. ... shall be considered as conclusive evidence as to the

sufficiency of any work, materials or goods to which it relates, nor shall it relieve the

contractor from his liability to amend and make good all defects, imperfections,...

(Clause 32.0)

h) Interim certificate is not an evident that the work have been properly carried out

and complete and it does not release the contractor of his responsibilities for

defects.

3.7.2 Certificate As A Condition Precedent To Payment

‘Within a number of days as stated in the Appendix ... (or if none stated then within 30

days) ... of the issue of any such interim certificate ... the Government will make a

payment to the contaractor on the amount certificate as due to the contractor in the

said certificate’ (Clause 28.6)

a) The payment certificate must be prepare before a payment can be made to the

contractor.

b) London Borough of Camden V Thomas Mclnerney & Sons Ltd. (1986) – the

architect signed certificates but they never sent out because a subsequent

40

inspection revealed defective work. It was held that since the certificates was not

issued, it was of no effect.

3.7.3 Late Certification

‘within 14 days from the date of any such valuation being made ... the S.O. shall issue an

Interim Cerificate stating the amount due to the Contractor ...’ (Clause 28.3)

a) No provision to deal with situation where the S.O. fails to certify within the

specified time.

b) However, contractor can commence arbitration proceeding on the ground that the

certificate has been improperly witheld. He does not have to wait until the work

practically completed.

3.7.4 Minimum Amount

‘... and the total value thereof has reached the sum reffered to in the Appendix ... the

S.O. at that time make the first valuation on the same.’ (Clause 28.1)

Thereafter, once (or more often at teh discretion of the S.O.) during the course of each

succeeding month ... each subsequent valuation shall not be less than the sum reffered to

in the Appendix ...’ (Clause 28.2)

a) The amount certified should be graeter than the minimun amount for interim

payment certificates in accordance with the KPKR’s instruction and as stated in

the Appendix of the conditions of contract as follows:

i. First payment – value of work executed and materials delivered is not less

that RM 1,000.00.

ii. Subsequent payments – ditto.

b) However, the S.O. may issue the certificate when dealing with a small balance at

the end of the contract.

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3.7.5 Correction of Certificates

a) The contractor is entitled to be paid only for work properly done.

b) The S.O. may make any correction or modification in any previous certificate.

c) Certificates issued cannot be withdraw but the contractor can request the S.O. to

issue a further certificate to correct any patent or letent error discovered.

d) The S.O. has the authority to omit or reducethe value of any work not carried out

to his satisfaction in any certificate (Clause 48.3).

3.7.6 Under-certification

a) If the contractor is not satisfied with the amount certified by the S.O.:

i. Contractor can request S.O. to adjust the under-certification in a subsquent

certificate.

ii. If S.O. refuses, contractor may take the dispute to immediate arbitration

on the ground that certificate is not prepared properly.

iii. The contract gives no right to contractor to sue for higher sum.

b) Lubenham Fidelities & Investment Co. Ltd. V South Pembrokeshire Distric

Council (1986) – The employer only needs to pay the contractor the sum stated

in the interim certificate as being due to the contractor from the employer even if

the certificate contains a latent or patent error.

3.8 PAYMENT TO CONTRACTOR

3.8.1 Generally

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‘Within a number of days as stated in the Appendix ... (or if none stated then within 30

days of the issue of any such Interim Certificate), the Gevernment will make a payment

to the contractor ...’ (Clause 28.6)

a) The certificates are binding on the employer and he must make the payment

within a specified period.

b) However, there is no provision to deal with situation where the Government fails

to py within the specified time.

3.8.2 Dispute by employer

a) Over-payment will result in unnecessary early expenditure by the employer and

also will cause problem in recovering his money in the event of insolvency of

contractor.

b) The employer may dispute the S.O.’s opinion but the contract gives no right to

the employer to withhold payment due to the contractor. The employer must pay

up within the honouring period.

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