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Benchmarking Final Payment Terms

Benchmarking the Final Payment Terms and Conditions of FIDIC, AIA, EJCDC and Consensus Docs Contracts

STUDENT PAPER

By Danlei Jiang

SKEMA Business School

Lille, France

 



ABSTRACT

Architects professional service in a construction project usually takes a long period, it may contain several months or even several years. During such long term, the project may occur a lot of changes which may influent the final payment. However, there are few terms of final payment in the construction contract. Therefore, this paper is developed to analyze the issue and use Dominance method to compare different standard forms such as the American Institute of Architects (AIA), the Construction Specifications Institute (CSI), International Federation of Consulting Engineers (FIDIC), Engineers Joint Contract Documents Committee (EJCDC) and Consensus Docs. Based on the analysis, the author suggests use final payment certificate and set a deadline to guarantee the payment. In addition, the owner and contractor shall constitute a waiver of claims after made the final payment.

KEY WORDS: construction contract, architect professional service, final payment, owner and contractor, Dominance method, payment certificate

INTRODUCTION

With the rapid development of globalization, more and more construction companies and architects start to work in an international environment with people from different countries and cultures. As we all know, contract as the basis and of a project or program, plays a very important role from beginning to end, especially for an international construction, because it is more multiple and complicated to control the whole duration. Therefore, this paper is developed to analyze an important part of the architect professional services contract, final payment, with different organization standards such as AIA, CSI, FIDIC, EJCDC and Consensus Docs.

In this paper, the author uses Dominance method as a tool to compare the different statement about final payment between the contract “Architectural and Engineering Services Agreement” and the other organizations’ standard form which showed above. Then, this paper will analyze the problems and opportunities what this construction contract has in the final payment part and try to find out a perfect solution and give several suggestions in order to make the contract more comprehensive and practical.

When should the final payment due by the owner and contractor? Is there something they must double confirm before the final payment? Do they need a deadline or time limitation for the final payment even some changes happened? All these kinds of questions should be thought in more details and well listed in the construction contract. However, in the contract we chose for analysis, it just stated that all stage’s final payment need an acceptance written by the owner. Obviously, this contract missed a lot of important statement about the final payment such as the questions list above. It is too vague to clearly articulate the responsibilities, rights and interests for both owner and contractor. Therefore, this paper is developed to analyze the statement of final payment in FIDIC, AIA, EJCDC and Consensus Docs and find a better one which could suit more for the construction contract we were chosen.

METHODOLOGY

In the analysis of this paper, the author uses Dominance method as the main methodology. Dominance method as one of the Multi-Attribute Decision Making (MADM) methods, is more useful and practical especially when there are subjective attributes. As mentioned before, we planned to compare the final payment terms in different standard forms such as CSI, AIA, EJCDC and so on. By using Dominance method, we could easily find out a better or the best term in their statement, and clearly know how to consummate the construction contract we were chosen.

FINDINGS

  1. Compare with the baseline: CSI

In this paper, we use CSI as the baseline for the construction contract. There are many clear terms in CSI’s statement. And it could be very helpful to consummate the final payment part in the construction contract if we refer the terms in CSI. There are three terms talking about final payment.

More…

To read entire paper, click here

 

Editor’s note: Student papers are authored by graduate or undergraduate students based on coursework at accredited universities or training programs.  This paper was prepared as a deliverable for the course “International Contract Management” facilitated by Dr Paul D. Giammalvo of PT Mitratata Citragraha, Jakarta, Indonesia as an Adjunct Professor under contract to SKEMA Business School for the program Master of Science in Project and Programme Management and Business Development.  http://www.skema.edu/programmes/masters-of-science. For more information on this global program (Lille and Paris in France; Belo Horizonte in Brazil), contact Dr Paul Gardiner, Global Programme Director [email protected].



About the Author


Danlei Jiang

Lille, France

 

 


Danlei Jiang
is a MSc student in SKEMA Business School, major in Project and Programme Management & Business Development (PPMBD). She graduated from Soochow University, China and holds a Bachelor’s degree in Public Finance. In 2016, she has worked for Eaton, a power management company as finance assistant in Suzhou, China. She has both project management and finance education background. She lives in Lille, France now, and can be contacted at [email protected].