Building work is paid for in stages, and an interim certificate is the instrument that decides each stage. Somebody, usually the quantity surveyor or the architect, values what has actually been built, deducts what has already been paid and what is being held back, and certifies the balance as due.
It is the point at which measurement becomes money, and it is the mechanism most small builds handle worst.
What is in a certificate
A typical calculation runs:
| Line | Amount | | --- | --- | | Gross value of work executed to date | 7,420,000 | | Add: materials on site, unfixed | 310,000 | | Add: approved variations to date | 486,000 | | Gross valuation | 8,216,000 | | Less: retention at 5% | (410,800) | | Less: previously certified | (6,100,000) | | Net amount now due | 1,705,200 |
Two things in that table are worth pausing on.
Materials on site, unfixed. Goods delivered but not yet built in are frequently included, sometimes at a reduced percentage, and sometimes only where they are properly stored and protected. Whether they count, and on what basis, is a contract question worth reading before the first valuation rather than during it.
Previously certified, not previously paid. The certificate values cumulatively and deducts what was certified before. If a previous certificate was certified and not paid, that gap is a payment problem, not a valuation one, and it will not fix itself in the next certificate.
What it is not
It is not approval of the work. An interim certificate values work that appears properly executed on the evidence available at the time. It is expressly interim. Certifying work that later proves defective does not make it acceptable, and a defect discovered afterwards is still a defect.
It is not a final position. Valuations are provisional and are corrected in later certificates and in the final account.
Why certificates matter more than the amounts on them
The commonest problem on a small build is not a disagreement over the valuation. It is certificates that arrive late, or are issued on a figure the contractor applied for without anybody measuring anything.
Both produce the same result. The contractor funds the works out of their own working capital, slows down, and the programme goes with it. A site that stops because a certificate is three weeks late has cost the owner more than the certificate was worth, because the site still carries its time-related preliminaries while nothing is happening on it.
Two disciplines fix it.
Value on a fixed date every month, on site, with both sides present. A valuation done at a desk from a contractor's application is not a valuation.
Pay within the period the contract states. If the contract is silent on the period, that is a gap to close before the first certificate rather than after the first late one.
What goes wrong
Overvaluation early. Generous early certificates leave the employer paying for work not yet done, which is exactly the exposure retention exists to limit. It usually shows up as a contractor who is comfortably ahead on cash and behind on programme.
No record of what each certificate valued. A certificate that states only a net figure cannot be checked against the one before it. Every certificate should carry the element breakdown it was built from.
Variations valued separately and forgotten. Approved variations belong in the gross valuation. Left out, they accumulate into a final account surprise that both sides then have to reconstruct.