Every month a contractor asks to be paid for work they say they have done. The certification process is where an absent owner keeps or loses control of the money.
A payment application is the contractor statement of what they have earned in the period. Certification is the process by which a supervising engineer measures that claim, reduces it to what has actually been done and approved, and issues a certificate you pay against. Paying applications without certification is the single most common way owners overpay a build.
Before stage one
Certification only works if the contract already defines the valuation date, the measurement basis, what counts as materials on site, the retention percentage, the period for certifying and the period for paying. If those are loose, every month becomes a negotiation carried out under the pressure of a contractor who needs cash.
- A priced schedule of works or bill of quantities that both sides accept as the measurement basis.
- A named certifier with the authority to reduce an application, stated in the contract.
- The retention percentage and its release points written into the contract.
- A fixed monthly valuation date, so applications do not drift to suit cash needs.
- A rule on materials on site: whether they are paid for, and what evidence of ownership is required.
Stage 1: Joint measurement on site
The contractor quantity surveyor and the supervising engineer walk the works together on the valuation date and agree quantities completed. Doing this jointly removes most disputes before the paperwork exists, because both sides saw the same wall on the same day.
- Deliverable: An agreed measurement sheet signed by both parties on the valuation date.
- Owner: Supervising engineer with the contractor surveyor.
- Approval gate: No application accepted without a joint measurement record attached.
Stage 2: Contractor submits the application
The application sets out work completed in the period, materials on site if payable, any approved variations, the cumulative total, the previous total certified and the sum now requested. Each variation must reference an approved instruction number rather than appearing as a described item.
- Deliverable: A complete application in the agreed format with supporting schedules.
- Owner: Contractor.
- Approval gate: Incomplete applications returned rather than partly assessed.
Stage 3: Test quality before quantity
Work that has not passed its inspection is not payable, whatever has been built. Check the application against the inspection and test records for the period, because a contractor who has closed up work without a hold point signature is asking you to pay for something you cannot verify.
- Deliverable: A cross reference between claimed items and their inspection records.
- Owner: Supervising engineer.
- Approval gate: Items with open non conformance reports excluded from the valuation.
Stage 4: Assess variations and exclude the unapproved
Variations are paid only where an instruction exists and a price was agreed or determined under the contract. Work the contractor did because it seemed necessary does not become payable by appearing in an application. Keep unapproved items in a separate list that is resolved on its own timetable.
- Deliverable: A variation schedule showing approved, submitted and rejected items.
- Owner: Certifier with the owner representative.
- Approval gate: No new variation enters the valuation without an instruction reference.
Stage 5: Apply retention, advance recovery and set offs
Deduct retention at the contractual percentage, recover the agreed portion of any advance payment, and apply any set off the contract permits, having given whatever notice it requires. Doing this in a fixed order each month makes the certificate easy to read and hard to argue with.
- Deliverable: A certificate showing gross valuation, each deduction and the net amount due.
- Owner: Certifier.
- Approval gate: Any set off supported by the notice the contract requires.
Stage 6: Issue the certificate and pay on time
Issue the certificate within the contractual period, copy it to the owner and the contractor together, and pay the certified sum by the due date. Late payment by an owner is the fastest way to lose the right to complain about anything else, and it pushes a contractor towards cutting corners to protect cash.
- Deliverable: A dated certificate and a payment record matching it.
- Owner: Owner, against the certificate.
- Approval gate: Payment released only against a certificate, never against an application.
Stage 7: Reconcile against the forecast
Each month compare the cumulative certified amount against the cash flow forecast from the baseline programme. A contractor certifying far below forecast is behind. One certifying far above it may be front loading the valuation against work that is easy to measure but not on the critical path.
- Deliverable: A cumulative certified against forecast chart updated monthly.
- Owner: Owner representative.
- Approval gate: Divergence of more than the agreed tolerance explained in writing.
Handovers between stages
The handover that causes most trouble is between the certifier and the person who releases funds, particularly when the owner is in another time zone and the payment run is weekly. If the certificate arrives two days after the run closes, the contractor waits a week for no reason and treats it as late payment. Fix the calendar so that the valuation date, certification period and payment run line up.
How you know it is finished
The monthly cycle is healthy when a joint measurement exists, a certificate is issued in the contractual period, the payment matches the certificate, the variation schedule contains no surprises and the cumulative total tracks the forecast. When all five hold for three months running, your cost control is working.
Domira designs, builds and manages projects across Saudi Arabia for owners who are based abroad: land appraisal, feasibility, design, construction, handover and asset management under one accountable contract. Send us the plot or the brief and Domira will put the numbers in front of you before you commit.
Frequently Asked Questions
What is the difference between a payment application and a payment certificate?
An application is the contractor claim for the period, prepared by them and reflecting their view of progress. A certificate is the independent assessment of what is actually payable, issued by the person the contract appoints to certify. The difference between the two numbers in any given month is the measure of how much value the certification process is adding.
Can an owner reduce a contractor payment application?
The certifier can and should reduce an application to the value of work properly executed, approved variations and any payable materials, and can withhold for work that has failed inspection. What an owner cannot safely do is deduct amounts the contract does not permit or skip the notices it requires. Substantial withholding should be checked with a licensed adviser before the certificate is issued.
Should materials delivered to site be paid for before they are installed?
Only if the contract says so, and only with the protections it requires. Typically these include evidence that title has passed to you, that the goods are properly stored and identified as yours, and that they are insured. Paying for stored materials without those protections leaves you exposed if the contractor becomes insolvent or if the supplier retains title.
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