The building work finishes, the keys are handed over, and the project then stays open in the books for a year or more because the final account has not been agreed. By then the people who knew the story behind every instruction have moved to other jobs, and only the paperwork is left to speak. This guide explains what the final account actually is, walks through a worked reconciliation in SAR, and then covers the administrative closeout checklist, retention release, closing subcontractor accounts, demobilisation and the final cost report.
Key takeaways
- The final account is one equation: original contract sum ± agreed variations ± remeasurement ± provisional sum adjustments ± claim outcomes − liquidated damages − previous certified payments.
- Money lost on the final account is usually lost a year or more earlier, on the day an instruction was carried out without a signed variation.
- Final accounts drag for two reasons above all: variations nobody agreed a value for, and records nobody can prove. Both are fixed during the job, not after it.
- Administrative closeout — as-builts, O&M manuals, warranties, commissioning certificates — gates practical completion, and practical completion gates the first half of retention.
- Subcontract accounts close in step with the main account: what was omitted from yours is omitted from theirs, and what was deducted from you because of them is deducted with evidence.
What the final account actually is
The final account is the statement that fixes the contract’s final value after everything that happened during construction, then subtracts what has already been certified to show the balance due. It is not one last monthly valuation. It is a rebuild of the whole contract: every item added or omitted, every quantity remeasured, every provisional sum replaced with what was actually spent.
- The original contract sum, as signed.
- Plus or minus the net of agreed variation orders, additions and omissions alike.
- Plus or minus remeasurement of items priced on provisional quantities.
- Plus or minus provisional sum adjustments: the allowance comes out and the expended amount goes in.
- Plus agreed claims, such as prolongation costs that follow an awarded extension of time.
- Minus any liquidated damages due.
- Minus the total of previous certified payments, leaving the balance due.
A worked example: from contract sum to balance due
Take an office building on a SAR 48 million contract that was granted an extension of time and still finished 18 days after the extended completion date, carrying a provisional sum for external works and utility coordination. The figures are illustrative, but the arithmetic has to close exactly as it does here.
| Item | Amount | Source |
|---|---|---|
| Original contract sum | 48,000,000 | Signed contract |
| Net agreed variations | +3,260,000 | Register of signed variation orders |
| Remeasurement of provisional quantities | −410,000 | Joint measurement records |
| Provisional sums (2,400,000 omitted, 1,985,000 expended) | −415,000 | Supplier invoices and instructions |
| Agreed prolongation costs | +620,000 | Extension of time decision |
| Liquidated damages (18 days × 20,000) | −360,000 | Damages clause in the contract |
| Adjusted final contract sum | 50,695,000 | Sum of the above |
| Less previous certified (gross) | −48,920,000 | Last certified valuation |
| Balance of final account | 1,775,000 | Before retention movements |
Notice the provisional sum adjustment is negative: the allowance was larger than the spend, so the difference goes back to the client. Plenty of contractors treat a provisional sum as a guaranteed slice of the contract value and are surprised at the final account to learn it was only ever theirs to the extent they spent it and could prove it.
Why final accounts drag on for months
Final accounts are rarely late because of the arithmetic. They are late because some of the figures were never agreed and nobody holds a document that proves the others. The causes repeat from job to job:
- Changes built on site instructions with no priced variation order, which reach the final account as claims rather than agreed items.
- Measurements the consultant never signed at the time, for work that is now buried behind finishes and cannot be measured again.
- An extension of time requested and never decided, so liquidated damages and prolongation hang together. Contemporaneous records are what settles it, as the guide to records that win delay claims explains.
- Provisional sum invoices scattered between procurement and accounts, with nobody holding a complete file.
- The team that knew the story has left, and whoever remains inherits a file they only half understand.
Every month of delay costs real money: a balance due that is not collected, bonds and guarantees still live with their fees, and one or more people still working on a project that has stopped earning.
The final account is assembled during the job
To see where the money goes, compare what you claimed for variations against what was agreed, split by the kind of document you held on the day the work was done. The pattern is close to universal:
| Document held at the time | Claimed | Agreed | Recovery |
|---|---|---|---|
| Signed, priced variation order | 2,900,000 | 2,880,000 | about 99% |
| Written instruction, unpriced | 780,000 | 380,000 | about 49% |
| Verbal instruction | 500,000 | 0 | 0% |
| Total | 4,180,000 | 3,260,000 | about 78% |
That is SAR 920,000 gone, and not a riyal of it was lost at the final account table. It was all lost on site, the day somebody said “just do it, we’ll sort it out later”. That is why the variation register has to be live for the whole job: every instruction with a number, a date, a proposed value and an approval status.
What should be closed every month, not at the end
- Variations: no instruction built without a number and an initial price, and no price left pending for more than one valuation cycle without a written chase.
- Measurements: signed before the work is covered up, not after.
- Provisional sums: one file per allowance, collecting quotes, invoices and approvals as they happen.
- Daily reports: the only witness to what happened on a given day, and what both sides fall back on when they disagree a year later.
The administrative closeout checklist
Commercial closeout cannot finish without administrative closeout, because the practical completion certificate — which triggers the first half of retention and starts the defects liability period — is usually not issued until the handover file is complete. The site-level detail of snag lists is in the guide to building the handover pack; here is the order that governs closeout:
Close the snag list
Every item closed and verified by whoever raised it, or agreed in writing to be cleared during the defects period on a list attached to the completion certificate.
Testing and commissioning certificates
Test and commissioning certificates for MEP and fire and life-safety systems signed by the consultant, not just internal test sheets.
As-built drawings
Drawings that show what was built rather than what was designed, approved by the consultant, at the latest revision of every sheet.
O&M manuals
A manual for every system and piece of equipment, with spare parts lists and planned maintenance schedules, in the format and number of copies the specification asks for.
Warranties
Supplier and manufacturer warranties in the client’s name, with start dates tied to handover rather than to delivery.
Practical completion and handover
Requested in writing once everything above is in place, with a signed record of keys, meters and readings handed over. The defects liability period runs from that date.
Retention release and closing subcontract accounts
Retention is usually released in two halves: one at practical completion, the other at the end of the defects liability period once the defects raised during it are fixed. In our example, 5% of the adjusted final sum is SAR 2,534,750, so roughly 1.27 million at each stage. Both halves need a written application, and the conditions are covered in the guide to when retention is released.
Subcontract accounts close back-to-back with yours
- Work omitted from your main contract that a subcontractor would have done is omitted from their contract at the matching value; work added by an agreed variation is added to theirs with its own order.
- Contra-charges against a subcontractor — repairs you did for them, or the share of damages they caused — need dated written evidence, or they become a second dispute.
- Each subcontract schedule of values should close at exactly 100%, never above, which is far easier if valuations were controlled from the start, as in the guide to schedules of values and subcontract billing.
- The subcontract final account agreement should carry a full and final settlement statement, with an explicit carve-out for retention still held until the end of the defects period.
Demobilisation and the final cost report
Demobilisation is planned, not something that happens on its own: off-hire rented plant the moment it is no longer needed rather than a month later, transfer surplus materials to another job with a stock movement, terminate temporary power, water, telecoms and security, and release insurances and bonds when the contract allows. Every week the site stays set up after handover is cost without revenue.
| Category | Budget | Final cost | Variance |
|---|---|---|---|
| Labour | 9,600,000 | 10,450,000 | +850,000 |
| Materials | 18,200,000 | 18,900,000 | +700,000 |
| Subcontracts | 12,400,000 | 13,350,000 | +950,000 |
| Plant | 2,300,000 | 2,150,000 | −150,000 |
| Site overheads | 2,300,000 | 2,500,000 | +200,000 |
| Total | 44,800,000 | 47,350,000 | +2,550,000 |
Cost ran SAR 2.55 million over the original budget, but revenue rose to 50.695 million, leaving a margin of SAR 3,345,000 — about 6.6% against 6.7% at tender. The honest reading is that agreed variations covered most of the growth, and the 920,000 lost on undocumented instructions is the difference between a margin that held and a better one. The usual causes of the drift are unpacked in the guide to why construction costs overrun.
Lessons learned: three questions are enough
- Where did cost depart from the estimate, and was it quantity or unit rate?
- What did we claim that was not agreed, and why? Which document would have changed the outcome?
- What will we do differently in the next tender and in managing change from day one?
Frequently asked questions
What is a final account in construction?
It is the statement of the contract’s final value: the original sum adjusted for agreed variations, remeasurement, provisional sums, agreed claims and liquidated damages, less everything already certified. The result is the balance due to, or occasionally from, the contractor. The final payment application is the claim for that balance, and in practice it is not certified until the final account is agreed.
When should a contractor start preparing the final account?
From the first variation. A good final account collates agreements signed during the job, and a register updated monthly turns the final exercise into weeks of work rather than months.
Are liquidated damages deducted if an extension of time is still pending?
That depends on the contract and on the engineer’s or consultant’s determination, but a pending request puts the damages themselves in dispute. That is why extension claims are best decided before the final account rather than argued alongside it.
What documents are usually needed before practical completion?
A snag list closed or agreed for closure, testing and commissioning certificates, as-built drawings, O&M manuals and supplier and manufacturer warranties. The exact list comes from the contract specification.
Can subcontract accounts be closed before the main final account is agreed?
For most items, yes. Whatever both sides agree can be settled, holding back only items genuinely tied to an open dispute with the client, and recording that in writing in the settlement.
Build your final account from day one
In muqawil, variations go through a recorded approval workflow, subcontracts run on a schedule of values with pay applications that refuse to bill past 100%, retention is tracked from the moment it is held to the moment it is released, and punch lists and documents with their revisions sit in one place. The project reaches closeout with its numbers ready instead of rebuilt from memory.