Running Account Bills: How Payment Actually Flows on a Public Works Contract

On a public works contract you are paid against measured work, periodically, after certification. Understanding that sequence is what turns "the department has not paid" into a specific question with a specific answer, which is usually the difference between a bill that moves and a bill that does not.

The sequence

1. Work is executed and recorded as it proceeds.
2. Work is measured and entered in the measurement book by the department's engineer, with the contractor present or in agreement.
3. The bill is prepared against measured quantities at contract rates.
4. The bill is checked by the department, technically and then by accounts.
5. Deductions are applied: retention, TDS, GST TDS, labour cess, recovery of any mobilisation advance, and any other contractual recoveries.
6. The net amount is paid.

The crucial point is step two. Payment follows measurement. A bill for work that has not been measured is not a late bill; it does not exist yet in the department's system.

Where bills actually get stuck

Measurement not done. The engineer has not visited, or the entries are incomplete. This is the most common cause, and it is the one contractors can most directly influence by requesting measurement in writing and being present for it.

Measurement disputed. Quantities recorded differ from what you claim. Resolve at the measurement book, at the time, rather than in the bill.

Documentation incomplete. Test certificates, quality records or completion documents required before a bill can be passed.

Technical check queries. Rates applied to the wrong item, quantities exceeding the BOQ without approved variation, arithmetic.

Accounts stage. Budget availability, or the file sitting in a queue.

Nobody asked. Files move when someone follows up.

Variations without approval

A recurring and expensive mistake: executing work beyond the BOQ quantity, or work not in the BOQ at all, on a verbal instruction.

Quantities beyond the BOQ generally require an approved variation before they can be paid. Work executed without it may be measured and still not payable, and the contractor is left arguing after the money has been spent.

Get variations approved in writing before executing them. Where site conditions force immediate action, record what was done and why, in writing, the same day, and follow with a formal variation request.

The deductions

Each running bill is reduced by:

• Retention or security deposit, held until after the defect liability period. See retention money
• TDS under income tax, creditable against your liability
• GST TDS where applicable, creditable in your GST ledger
• Labour cess, where the work attracts it, which is a cost rather than a credit
• Recovery of mobilisation advance, in instalments
• Liquidated damages, where delay has been assessed

TDS, GST TDS and labour cess covers which are recoverable and which are a real cost. The distinction matters for pricing.

The cash flow this creates

You buy materials and pay wages during the period. You are paid after measurement, checking and processing. The gap is financed by you.

That financing cost is real and belongs in the bid price rather than in the overdraft. On a contract with a long measurement cycle it can be a significant percentage. See how to price a government tender.

The habits that shorten the cycle

• Request measurement in writing at the end of each period rather than waiting to be visited
• Be present at measurement and agree entries at the time
• Submit complete bills, with every supporting document the contract requires
• Keep a bill register with the date submitted and the stage each bill has reached
• Follow up in writing, building a trail rather than making calls

The register is what makes escalation possible, because an escalation with no documented history is weak.

When it stops entirely

Where a bill is certified and still unpaid, the position is different: this is a payment problem rather than a process problem, and the route is different. See when a government payment is late.

Avsar keeps the bill position alongside the contract so what is measured, certified and outstanding is one number rather than a folder. See the treasury module.