Payment Certificates

Can a negative Payment Certificate be issued? If yes, under what circumstance and is the contractor obliged to pay the employer Frank Ndubi It may have been easier to respond to the issue if circumstances giving rise to the negative payment are stated. In my experience these may be due to the negligence on the part of the Q.S or whoever is raising the certificate, for having recommended an overpayment in the previous certificate. Depending on the works progress (percentage complete) and the overpayment in the previous certificate, the employer will fall back to the contract provisions for protection (such as the retention fund) or invoke the professional indemnity clause in the professional services agreement with his consultants. If the negative payment is a result of works having retrogressed due to say abandonment (base and subbase in roadworks) a claim should follow the payment to counter the negative effects. Michael Matthews FQSI,MSc MCIOB MBEng ACIArb I have come accross this in the Middle East and yes a negative certificate can be issued. This happens in the case of overvaluing the works and therefore rectifying the valuation, or where works are defective, need removing and therefore have to be omitted from the valuation. What has happened in the case I was involved with, the client issued the negative valuation and did not make any further payment until the valuation became positive after carrying out further work on the project. The contractor was not asked to pay back the difference although the client was within its rights to claim back the difference. Jeffrey Nxumalo Payment certificates depends on the form of agreement used, but they are normally issued every month based on the reasonable value of work executed. Interim payment certificates can be in favour of the contractor or the employer, therefore negative certificate is permissible, and the party responsible to effect payment shall do so within the contractual timeframe, failing which default penalties shall apply. The same apply in the final payment certificates. While this arrangement is normally acceptable, it is not a good reflection on the person responsible for valuation for payment certificates, in most cases thi will be the Quantity Surveyor's responsibility Mark Rahim I think a lot of issues (not all set out here) should be taken account of and affect the way in which the matter is handled. Frequency of payment and the value of work in progress may determine the most appropriate course of action which with open dialogue, doesn't necessarily need to be constrained to the mechanisms within the contract. If for the purpose of this discussion we consider the negative certificate value to be a consequence of 'measure' over-certification - then the relative amount is very much the focus. The time that has elapsed since the previous certificate has not permitted enough work progress to be able to correct the previous value suggesting the previous valuation was some way off. If the over payment occurred as a result of a computational error in certificate figures, then a through review of checking and QA processes may be in order. It could simply all be a very simple mistake relating to interpretation of scope in valuing work complete, in which case the payee has more than a moral obligation to reimburse once the facts are made clear and agreed. As a last resort, I do recall a court case where the phrase used was "fraudulent acceptance of overpayment". I have personally been in the situation as you have described it and it is not the end of the world. In my opinion it is correct to record the contractor as being a debtor and a 'negative' certificate will go some way to do this. Depending on the specifics, the amount of overpayment may far exceed the contractor's anticipated profit and if it were to close up shop now or enter into administration it could all get quite ugly without

a solid record in place before the event. Just as a disclaimer - this isn't legal advice or recommended course of action. This is a forum, right? Anyone? Mahen Hewawasam We recently came across with this situation in one of the projects in Middle east. Luckily, the amount was not so big, and project had different phases, involving the same contractor. Usually, the Client will not be happy over a negative payment scenario, and in order to avoid lot of exlanation, we managed to transfer the nativity from one phase to the other, making a null payment for one, while reducing the certified amount in the other. In the end, (because the nativity was small < 100,000), it was still a positive payment, overall.