Final Account

The final account is the financial conclusion of a public contract. It brings together every payment made during the life of the contract, every variation agreed, every claim settled or rejected, and every deduction applied, to produce the definitive statement of what either party owes the other at close. Agreeing a final account is often one of the most contested steps in contract closeout, particularly on complex works or IT projects.

What is a Final Account?

A final account reconciles the total financial position of the contract from commencement to completion. In a typical works or services contract, the final account will incorporate:

• the original contract sum,
• all interim payments and milestone payments made during the contract period,
• the value of authorised variations (additions and omissions to the original scope),
• any agreed compensation events or change orders,
• claims submitted by either party (for additional costs, loss and expense, or damages),
• retention released at practical completion and at the end of the defects liability period,
• service credits or deductions applied under the performance monitoring regime,
• any sums due by the supplier to the authority (such as overpayments or liquidated damages for delay).

The resulting figure is either a balance due to the supplier (if total payments made are less than the final account value) or a sum due back to the authority (if overpayments or deductions exceed the contract sum).

In construction contracts using FIDIC or NEC forms, the final account process follows a prescribed procedure: the contractor submits a final payment application, the engineer or project manager certifies the amount due, and the employer pays within the contractual period. Disputes over the final account may be referred to adjudication, arbitration, or court.

The final account value may differ materially from the contract value (awarded) published in the award notice, particularly on large infrastructure projects where scope changes and claims are common.

Why it matters for bidders

The final account is the last commercial negotiation you will have with a contracting authority before the relationship closes. Several commercial disciplines matter at this stage:

• Record-keeping throughout the contract: a well-evidenced final account claim depends on contemporaneous records of variations instructed, resources deployed, and costs incurred. Suppliers who have kept poor records during the contract are in a weak position at final account stage.
• Timely submission: most contracts specify a deadline for the contractor to submit their final account application. Missing this deadline can limit your ability to recover legitimate additional costs.
• Retention release: ensure that retention held throughout the contract is formally released as part of the final account process. Retention that is not formally claimed or released can become a source of dispute or simply go unclaimed.

Example

A Swedish county council awards a three-year IT support services contract at a value of SEK 9 million. Over the contract period, two variations add SEK 600,000, service credits of SEK 75,000 are applied for performance shortfalls, and the supplier claims SEK 120,000 for agreed additional work not covered by a formal variation. Interim payments total SEK 9.2 million against a final account value of SEK 9.645 million. The final payment due to the supplier at close is SEK 445,000.

Frequently Asked Questions

Is there a statutory deadline for agreeing a final account?

There is no EU-wide statutory deadline specific to final account settlement, but Directive 2011/7/EU applies to each individual payment within the final account process: once a sum is certified or agreed as due, the thirty-day payment clock starts. Lengthy disputes over the final account total do not suspend the obligation to pay undisputed amounts promptly.

What if the parties cannot agree on the final account?

Most contracts include a dispute resolution mechanism: negotiation, mediation, adjudication (common in UK construction), expert determination, or arbitration. Adjudication under the Housing Grants, Construction and Regeneration Act 1996 is widely used in UK construction and provides a fast (twenty-eight-day) binding interim decision. In EU member states, mechanisms vary by sector and national law.

Does a signed final account prevent later claims?

In most cases, yes. A final account agreement typically includes full and final settlement language that extinguishes further financial claims by either party in relation to the contract. Both parties should review any proposed final account language carefully before signing, as it generally operates as a contractual release.