Interim Certificate with Oral Variation, Late Handover and Threatened Demobilisation
A state government awarded a contract for a three-storey secretariat building under a standard form of contract with bills of quantities. The contract sum is ₦2.4 billion, duration 18 months, retention 5% up to a cap of 2.5% of the contract sum, and liquidated damages ₦2 million per day. At month 10, the contractor submits interim certificate No. 7 for ₦410 million, including: ₦85 million for an additional floor slab instructed orally by the client's engineer; ₦25 million for extended site supervision caused by the client's late handover of the site; and ₦12 million for materials delivered to site but not yet incorporated. The project manager's site record shows the oral instruction was later confirmed by email but not by a formal variation order, the site was handed over 8 weeks late, and the contractor has not submitted a programme update or notice of delay. The contractor threatens to demobilise.
1. Advise the project manager on how to value interim certificate No. 7.
Read the worked answer
The project manager should certify only work executed and materials properly on site in accordance with the contract. Start with the measured works. The ₦410 million includes three disputed items, so the base measured work is ₦410m − ₦85m − ₦25m − ₦12m = ₦288m, subject to re-measurement and the quantity surveyor's check.
The ₦85 million additional slab is a variation. The contract likely requires instructions in writing. An oral instruction later confirmed by email may be a written instruction if the contract permits email confirmation, but the project manager should not certify the full amount until a formal variation order is issued and the work is valued at bill rates or, where no rates apply, at fair valuation. The item should be excluded or certified 'subject to' agreement, not paid as of right.
The ₦25 million is a prolongation claim, not a works item. It should not be included in an interim certificate unless the contract expressly allows it and the claim has been determined. It belongs in a separate delay-cost assessment after extension of time is decided.
The ₦12 million for materials may be certified if the materials are delivered, protected, insured, not prematurely delivered and supported by invoices and site records. If verified, add ₦12m to ₦288m = ₦300m. Deduct retention at 5% = ₦15m; the retention cap is 2.5% of ₦2.4bn = ₦60m, so the deduction is within the cap. Recommended certified amount: about ₦285m, with the variation and prolongation held pending formal instruction and determination.
2. Explain the contractor's entitlement to extension of time and prolongation costs, and the procedural steps.
Read the worked answer
Late handover of the site is an employer-risk event. The contractor is entitled to an extension of time if the delay actually affects completion and the contractor gives notice within the period required by the contract. Entitlement is not automatic on the event alone; the contractor must show cause and effect, usually through a delay analysis and an updated programme.
On the facts, the contractor has not submitted a programme update or notice of delay. That is a serious procedural failure. The contract may bar or reduce the claim if notice is not given within the stipulated time. The project manager should not simply reject the claim; he should require the contractor to submit a formal notice, particulars and a revised programme immediately, and should reserve the employer's rights. If the contract allows, the employer can accept late notice without prejudice.
The ₦25 million for extended supervision is a prolongation cost claim. It is recoverable only if the extension of time is granted, the delay is employer-risk, and the contractor proves actual cost and mitigation. The sum appears to be an estimate. The contractor should provide payroll, site establishment and overhead records. The project manager should assess the claim separately from the interim certificate, consider any concurrent delay, and deduct betterment or costs not caused by the delay. The project manager should also remind the contractor that liquidated damages remain a risk if completion is delayed beyond the extended date.
3. Recommend how the client should handle the threatened demobilisation.
Read the worked answer
The client should not pay uncertified or disputed sums simply because of the threat. Demobilisation before completion would be a breach. The client should convene a without-prejudice meeting, confirm the amount properly due, and expedite certification of the verified ₦285 million or so. If cash flow is the real issue, the client can offer prompt payment of the certified sum and agree a timetable for resolving the variation and delay claims.
At the same time, the client should put the contractor on notice that demobilisation will be treated as a breach, reserve the right to call any performance bond, and consider terminating and re-letting if work stops. The client should document all communications, instruct the project manager to keep site records, and secure materials and site. Any payment should be expressly without prejudice to the client's rights on the disputed claims.
The client should also review the contract's payment and suspension provisions. If the contractor has a contractual right to suspend for non-payment, the client must ensure it has paid certified sums on time. If not, the threat is pressure tactics. A clear, written response that separates verified payment from disputed claims is the best way to avoid demobilisation while protecting public funds.