PAYMENT PROCEDURES

UNDER FIDIC 2017

CONDITIONS OF CONTRACT
 1.0 ADVANCE PAYMENT
Under the FIDIC Conditions of Contract for Construction (2017 Redbook), the
advance payment procedure is a critical aspect aimed at facilitating project
commencement
 1.1 CLAUSE 14 AND IT'S SUB-CLAUSES

According to Clause 14 (Advance Payment), the Employer may agree to provide

the Contractor with an advance payment as security for the execution of the
Works. Subclause 14.2 outlines that the amount of the advance payment, its
repayment terms, and the form of security shall be stipulated in the Contract.
Furthermore, Subclause 14.3 requires the Contractor to furnish the Advance
Payment Guarantee, which ensures the repayment of the advance. Notably, this
advance payment is subject to interest as per Subclause 14.4 if the repayment is
delayed beyond the specified period.
 1.2 NECESSITY

FIDIC 2017 Redbook’s provisions for advance payment are outlined in Clause 14,
emphasizing the necessity for a clear agreement on the amount, terms, and
security. The contractual requirement of an Advance Payment Guarantee adds a
layer of financial security for the Employer. However, the Contractor must be
diligent in adhering to the repayment schedule to avoid incurring interest
charges as per the contract terms, promoting a fair and secure mechanism for
project initiation
2.0 PROGRESS PAYMENTS
Progress payments play a pivotal role in sustaining contractor operations. The
process involves several steps, and adherence to these procedures is crucial for
both parties
 2.1. CONTRACTOR SUBMITS STATEMENT (C14.3)

The contractor initiates the payment process by submitting statements and

supporting documents to the Engineer. These statements can follow a monthly
schedule or be aligned with the agreed-upon payment schedule in the bidding
documents
2.2. ENGINEER CHECKS PREREQUISITES (C14.6)

The Engineer ensures that specific prerequisites are met before certifying
interim payments. These include the owner's approval of the performance bond
and the appointment of the Contractor's representative, subject to the
Engineer's approval
 2.3. FAIR DETERMINATION BY ENGINEER (C14.6)

The Engineer evaluates the completed work, applies deductions such as

retention and advance payment repayment, and assesses unperformed
obligations, including the cost of rectifying defective work. Modifications to
previous payment certificates may be made
 2.4. MINIMUM AMOUNT CHECK (C14.6)

The Engineer verifies that the net amount due to the contractor, after
deductions, meets the minimum specified in the contract. If the amount falls
below the minimum, the contractor is not entitled to an interim payment
certificate, and the Engineer notifies the contractor
2.5. INTERIM PAYMENT CERTIFICATE ISSUANCE (C14.6)

The Engineer is obligated to issue the interim payment certificate within 28

days of receiving the statement and supporting documents. Failure to certify on
time allows the contractor to take serious actions, such as suspending work or
terminating the contract.
 2.6. EMPLOYER'S PAYMENT OBLIGATION (C14.7)

The employer must make the payment to the contractor within 56 days of the
contractor's submittal of the statement and supporting documents. Failure to
comply entitles the contractor to take actions, including suspension of work and
termination, after specified notice periods. Additionally, the contractor is
entitled to financial charges on late payments without prior notice or
certification
 3.0 FINAL PAYMENT
Final payment marks a significant milestone in project closeout, signifying
agreement on all aspects. The final payment procedure involves the following
steps
 3.1. CONTRACTOR RECEIVES PERFORMANCE CERTIFICATE

The contractor receives the Performance Certificate, indicating successful

completion of the project
 3.2. DRAFT FINAL STATEMENT SUBMISSION (C14.11)

Within 56 days of receiving the Performance Certificate, the contractor submits

a draft final statement to the Engineer. In case of disputes, the Engineer issues
an interim payment certificate for the agreed-upon portion
 3.3. ENGINEER REQUESTS DRAFT STATEMENT (C14.11)

If the contractor does not apply for final payment, the Engineer requests the
draft statement within 28 days. If an agreement is reached, the contractor
submits the final statement. If not, the Engineer makes a fair determination and
issues the Final Payment Certificate.
 3.4. FINAL STATEMENT SUBMISSION (C14.11)
AND WRITTEN DISCHARGE (C14.12)

After reaching an agreement on the draft statement, the contractor submits the
final statement along with a written discharge
 3.5. FINAL PAYMENT CERTIFICATE ISSUANCE (C14.13)

The Engineer is required to issue the Final Payment Certificate within 28 days of
receiving the final statement and written discharge. Failure to certify on time
entitles the contractor to financial charges on late certification.
 3.6. EMPLOYER'S PAYMENT DEADLINE (C14.7)

The employer must make the payment (certified amount) to the contractor
within 56 days of receiving the Final Payment Certificate. Failure to comply
results in financial charges or interest on late payments