Final Account Forecast

Section 1

Purpose

Note on JCT editions: JCT has published the 2024 Edition. This guidance cites JCT SBC/Q 2016 clause references; the commercial and payment mechanisms are substantively unchanged in the 2024 edition, but specific clause references should be verified against the contract edition in use on any given project.

The Final Account Forecast (FAF) is the QS's structured estimate of the likely final financial settlement of the contract, prepared at Practical Completion and updated periodically throughout the Rectification Period until the Final Account is formally agreed. It is the QS's professional statement of where the project is expected to settle, clearly distinguishing between agreed items, assessed items, disputed items, and anticipated but not yet submitted items.

The FAF is a critical risk management tool for the client. It enables the client to understand the financial exposure at the end of the project, to make informed decisions about disputed items (whether to negotiate, settle commercially, or refer to adjudication), and to report accurately to their own board, funder, or programme manager. Under RICS Project Financial Control and Reporting guidance, the QS must report the FAF honestly and conservatively — inflating 'agreed' items to give a false picture of settlement progress is a professional integrity failure.

The FAF should be presented as a structured schedule with clear status categories for each item, enabling the client and their advisers to see the full range of outcomes from best case (all disputed items resolved in client's favour) to worst case (all disputed items resolved in contractor's favour).

Section 2

Key Principles

RICS Final Account Procedures (1st ed.): the QS is required to prepare and present a forecast of the Final Account settlement from PC, updated as items are agreed or positions change.
RICS Project Financial Control and Reporting: requires cost reports to distinguish clearly between agreed, assessed, disputed, and anticipated items — presenting a realistic, not optimistic, view of the likely settlement.
JCT SBC/Q 2016 clause 4.25.1: the contractor must supply all documents reasonably required for the adjustment of the Contract Sum not later than 6 months after Practical Completion (or after the last Section Completion Certificate where the works are sectional). Note that 3 months is the Design and Build period for the Contractor's Final Statement (DB 2016 clause 4.24) — the two contracts must not be conflated. The QS should request the submission promptly and check it against their own records.
RICS Ascertaining Loss and Expense (2nd ed., July 2024): provides the methodology for assessing prolongation and disruption claims; the FAF must include a reasoned assessment of all outstanding claims, not merely accept the contractor's figures.
RICS Change Control and Management (1st ed., effective 1 April 2021): variation register must be updated at PC to reflect the status of all instructions — agreed, unagreed, instructed-not-yet-valued.
RICS Cost Prediction professional standard (effective 1 July 2021): the QS must be able to identify and account for all known risk items in cost reporting; the FAF is the final application of this requirement before the account is closed.

Section 3

Practical Application

Step 1

At PC, extract the full Variation Register and categorise every instruction by status: agreed (both parties' QSs have signed off the value), assessed (your valuation, contractor's not yet agreed), disputed (positions exchanged and materially different), instructed-not-yet-valued.

Step 2

Request the contractor's Final Account submission at PC — remind them of the contractual submission deadline; if they fail to submit, note this in writing and proceed to prepare your own final account for comparison.

Step 3

Assess all outstanding loss and expense / prolongation claims using RICS Ascertaining Loss and Expense methodology; distinguish between agreed EOT periods and assessed periods; include a best/worst case range for disputed claims.

Step 4

Build the FAF spreadsheet showing: Original Contract Sum; agreed variations (add/omit); assessed variations (your figure/contractor's figure); disputed items (client's best estimate/contractor's claim); anticipated items; retention position; fluctuations if applicable.

Step 5

Calculate a realistic settlement range — best case (all disputes resolved favourably) and worst case (all disputes resolved against client) — and present both to the client with a central estimate.

Step 6

Update the FAF at intervals throughout the Rectification Period (typically monthly or quarterly depending on the value and complexity of outstanding items) — record movement on each item and the reasons for any changes.

Step 7

Advise the client on disputed items where the cost of adjudication may exceed the sum in issue — commercial settlement is often the most cost-effective route for smaller disputes.

Section 4

Common Mistakes to Avoid

Presenting only a single 'best estimate' figure without ranges — the client needs to understand the financial risk exposure, not just a central number.
Categorising assessed items as 'agreed' to make the picture look more settled than it is — this is a professional integrity failure under RICS rules.
Failing to account for the contractor's known but not-yet-submitted claims in the FAF — anticipated items should be included as a risk allowance, not ignored until submitted.
Not updating the FAF regularly during the Rectification Period — a stale forecast at the time the Final Account is agreed is a reporting failure.
Accepting the contractor's Final Account submission without independent verification — the QS must check every item against their own project records before accepting any figure.

Section 5

APC Competency & Quick Reference

Project Financial Control and Reporting Level 3 — Final Account Forecast preparation, range reporting, client advice
Contract Practice Level 3 — contractor's submission obligations, variation status, loss and expense assessment

What are the status categories used in a Final Account Forecast and why are they important?

Agreed (both parties have signed off the value); Assessed (QS's own valuation, not yet agreed with contractor); Disputed (positions exchanged, materially different); Anticipated (items not yet submitted but expected). The categories are critical for honest reporting — inflating 'agreed' figures to mask the true settlement position is a professional integrity failure.

How should the QS assess prolongation claims in the Final Account Forecast?

Using RICS Ascertaining loss and expense (RICS practice information, UK, 2nd edition, July 2024): first establish that the delay or disruption results from a Relevant Matter — loss and expense is an independent entitlement, so an extension of time is neither necessary nor sufficient for it, and the list of Relevant Matters is not the same as the list of Relevant Events; then check that the contractual notice and substantiation requirements have been met; assess actual cost using a time-based or resource-based approach; apply Emden or Hudson formulae for head office overheads only where actual cost basis is unreliable; present a best/worst case range for disputed claim items.

What should the QS do if the contractor fails to submit their Final Account within the contractual period?

Note the failure in writing immediately. Under JCT SBC/Q 2016 clause 4.25, if the contractor fails to supply the documents within the 6-month period, the QS may prepare the statement of adjustments from their own records. Issue a formal request, allow a reasonable additional period, then proceed on the QS's own figures while recording the contractor's failure to comply.

Section 6

Completion & Final Account Checklist

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Task

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Variation Register extracted and every instruction categorised at PC

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Contractor's Final Account submission requested with contractual deadline noted

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All L&E/prolongation claims assessed using RICS methodology

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FAF prepared showing agreed/assessed/disputed/anticipated items

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Settlement range (best case / worst case) calculated and presented to client

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FAF updated at regular intervals during Rectification Period

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Client advised on commercial settlement versus adjudication for disputed items

Section 7

CPD Learning Outcomes

Construct a Final Account Forecast with clearly categorised status items and present a realistic settlement range to the client in compliance with RICS Project Financial Control and Reporting requirements.
Apply RICS Ascertaining Loss and Expense (2nd ed., July 2024) methodology to assess prolongation and disruption claims for inclusion in the Final Account Forecast.
Advise clients on the commercial case for negotiated settlement versus adjudication for disputed Final Account items, taking account of the relative costs and risks of each approach.

Section 8