Stored Materials
Stored Materials
(OP)
Can someone help settle a dispute between our staff.
Our Contract is written in vague language. It says: you basically pay for stored materials.
The Contractor has stored $10,000 worth of materials at the site. Now it is time to make the second progress payment.
Pay # 1 - $10,000 Stored Materials & $100,000 Work Total
Total Payment 1 = $110,000
Pay #2 - $5,000 Stored Materials (Remaining has used some up) & $220,000 Work Total
Total Payment 2 = $225,000 - $110,000 (Pay 1) = $110,000
one person says we should force the $5000 to $0 under Pay #2. i dont believe this is fair b/c this would force the contractor to absorb the materials stored. basically we would be breaking the contract since arent paying him for stored materials.
Our Contract is written in vague language. It says: you basically pay for stored materials.
The Contractor has stored $10,000 worth of materials at the site. Now it is time to make the second progress payment.
Pay # 1 - $10,000 Stored Materials & $100,000 Work Total
Total Payment 1 = $110,000
Pay #2 - $5,000 Stored Materials (Remaining has used some up) & $220,000 Work Total
Total Payment 2 = $225,000 - $110,000 (Pay 1) = $110,000
one person says we should force the $5000 to $0 under Pay #2. i dont believe this is fair b/c this would force the contractor to absorb the materials stored. basically we would be breaking the contract since arent paying him for stored materials.





RE: Stored Materials
Steve
RE: Stored Materials
RE: Stored Materials
Okay. i forgot the negative amount for materials used. Confused myself.
Pay#2 would actually be
$5000 Stored Materials and $220,000 of total work.
The way our calculation works is that we have a negative number applied to our Total work in the amount of the stored materials used.
So Pay#2 would be $225,000 - $110,000 (pay #1) - $5000 (materials Used) = $110,000
This process will continue until the materials are used up and the materials stored balance reduces to zero.
Basically this gives us the ability to credit for materials that continue to be stored from pay estimate to pay estimate.
RE: Stored Materials
RE: Stored Materials
Your job is to confirm that the Contractor submitted his invoice correctly. You do this by carefully reading the contract.
RE: Stored Materials
RE: Stored Materials
Dik
RE: Stored Materials
RE: Stored Materials
Valuation Period 1. Contractor brought material onto site and stored it as per contract. You paid for him to store the material.
Valuation Period 2. No new material was brought onto site, but during the valuation period half of it was used.
One interpretation is that the material was brought onto site and you paid to store it. No new material arrived so no additional payment is required. The storage has not changed and a one of payment made (think lump sum) so the contractor gets nothing.
Or the storage was based on a 'renting space' arrangement. To start with you needed space to hold $10000 of material. Now they only have $5000 stored so less area taken on the site but it is still stored. You then need to pay the 'rent' for the land it stands on.
If your contract is vague, get ready for a claim.
RE: Stored Materials
RE: Stored Materials
I dont think I have come across a contract where the client pays for the material and then pays the contractor to hold it for him. As you say, the client owns the site, its his land which he is allowing the contractor to use. If the site is large enough.
If the site was too small and materials are stored elsewhere then the contractor will have a cost associated with setting up and maintaining a compound away from the site. He is entitled to be reimbursed for this.
RE: Stored Materials
I understand Ussuri, but by forcing the stored material account balance to zero, the contractor would not be credited for the materials that remain stored on site. How is storing half the materials in the second period different from storing the whole lot in the first period?
Note that the fact that they used half of the materials results in a deduction in the total payment #2, because we paid ahead for the materials that were used and these need to be subtracted from the payment.
In my mind it is the same thought process that we use to pay for constuction work, just in reverse. You take the total work completed on the project and subtract the dollar sum of the previous payments to determine what is due. In the case of stored materials, there may be materials stored for the duration of the project that don't get used until the end of the work, but eventually this will zero out.
RE: Stored Materials
RE: Stored Materials
RE: Stored Materials
Payment #1: The Contractor has done 100,000 worth of work and has 10,000 worth of material on site. You paid him $110,000.
Payment #2: The Contractor has done $220,000 worth of work and still has $5,000 worth of materials on site that has not yet been incorporated into the work.
It seems to me that the Contractor has expended $225,000 worht of labor, equipment and material. You have paid him $110,000. You owe him $225,000 - $110,000 = $115,000.
RE: Stored Materials