Your subcontractor payment process is probably costing you money-Here is what one African firm did about it

Your subcontractor payment process is probably costing you money. Here is what one African firm did about it

A structured valuation review procedure tested at two Ghanaian construction firms offers a blueprint Nigerian contractors can adapt immediately

If your firm certifies N5 billion in subcontractor payments a year and your over-certification rate is running at even 7 or 8 per cent—which, in the absence of structured controls, is a conservative estimate across the industry—you are signing off on N350 million to N400 million annually that the completed work does not justify. That is not a project management problem. That is a balance sheet problem.

Most Nigerian construction firms do not know their over-certification rate, because they have no systematic way of measuring it. The process by which a site-based quantity surveyor reviews a subcontractor’s interim payment claim and recommends a figure for certification is, at the overwhelming majority of firms, entirely informal. There is no written procedure. There is no corporate standard. The outcome depends on whichever QS happens to be on site that month.

This is not a failure of individual competence. Nigerian QS professionals are well trained and the NIQS maintains rigorous professional standards. The failure is organisational. Firms have never codified the valuation review process into a mandatory internal procedure the way they codify health and safety protocols or quality management systems. The result is inconsistency across sites, undocumented variation claims, and disputes that could have been avoided—all of which erode margins on projects where margins are already thin.

At the joint ICEC-AAQS conference held in Accra last October, a Ghanaian quantity surveyor named Evans Laryea presented evidence of what happens when a firm decides to close that gap. Laryea, who heads the QS department at one of Ghana’s top-tier construction firms, described how he had written a formal valuation review procedure in 2020, obtained company-wide adoption through a CEO directive, and tracked the results.

The numbers were striking. Over-certification dropped significantly within the first 16 months. The proportion of variation claims arriving without proper documentation fell by more than half. Post-certification disputes—the kind that stall projects, damage subcontractor relationships, and consume management time—fell sharply. When he moved to a second firm in 2024, the same approach produced similar discipline under different management and on a different portfolio.

The Ghana Institution of Surveyors subsequently disseminated the methodology through its professional development programme, and independent consulting firms adopted elements of it in their own practices.

What makes the approach relevant to Nigerian firms is not the Ghanaian context but the structural logic, which is simple enough to implement at any contractor organisation with a functioning QS department. The procedure rests on four disciplines.

First, no interim valuation is recommended for certification until the reviewing QS has confirmed that claimed quantities correspond to actual work completed on site, verified against approved drawings. This sounds obvious, but in practice—under the time pressure of a monthly certification cycle—it is the step most often compressed or skipped.

Second, variation claims and non-contract items are separated from routine measured work before they enter the certification recommendation. When variations are buried inside a lump-sum claim, they escape the scrutiny they require. Pulling them out forces each one to be justified independently.

Third, materials-on-site claims are reviewed against delivery records and linked to specific work packages. This prevents the common practice of certifying materials that have been delivered but have no clear connection to upcoming programmed work.

Fourth, disputed items above a defined threshold are escalated to senior review rather than resolved informally at site level. This is the control that prevents a site QS from approving a contested N50 million variation item because the subcontractor is pressing and the project manager wants to keep things moving.

None of these steps are new knowledge. Any NIQS member with five years of experience would recognise all four. The difference between knowing them and doing them consistently across every project, every site, and every certification cycle is a written procedure that management mandates and enforces.

The business case for implementing such a procedure is not complicated. Consider a mid-size Nigerian contractor with an annual subcontractor certification volume of N8 billion across a portfolio of five to eight active projects. If structured controls reduce over-certification by even four to five percentage points—which is well within the range of what the Ghanaian experience produced—the firm retains an additional N320 million to N400 million per year. That is money that was already earned on the projects. It was simply being certified out the door without adequate verification.

The cost of implementation is negligible. The procedure does not require new software, additional headcount, or external consultants. It requires a written document, a management directive making compliance mandatory, and a QS department head with the authority to enforce it. The Ghanaian firms implemented it with their existing teams.

There is also a less quantifiable but equally important benefit: subcontractor relationships improve when the certification process is transparent and consistent. Disputes typically arise not because subcontractors are trying to overclaim but because the review process is opaque and varies from one certification cycle to the next. A written procedure that both parties understand reduces friction, accelerates the payment cycle, and builds the kind of commercial trust that keeps good subcontractors coming back.

Obafemi Onashile, the immediate past NIQS President and a former AAQS President, told BusinessDay at the Accra conference that the profession has the institutional infrastructure to disseminate this kind of practical methodology—through CPD programmes, regional chapters, and the NIQS Journal—but that the raw material has to come from practitioners willing to document what they have built.

“The knowledge already exists inside the firms,” he said. “The question is whether we are going to keep treating internal procedures as proprietary secrets, or whether we are going to recognise that stronger commercial governance across the sector benefits everyone—contractors, subcontractors, developers, and the professionals who serve them.”

For the managing director of a Nigerian construction firm reading this, the immediate action is straightforward: ask your head of QS whether your firm has a written, enforceable procedure for subcontractor valuation review. If the answer is no—and at most firms it will be—the next question is why not, and the one after that is how quickly it can be fixed.

The Ghanaian experience suggests the fix is neither expensive nor complicated. What it requires is a decision that the days of leaving subcontractor payments to individual judgment and hoping for the best are over. The money your firm is losing to informal processes is already on the balance sheet. You just have not isolated it yet.