Interim Payment Application/ Interim Payment Certification

Blog / 23 May, 2023

The Interim Payment Application is prepared by the Contractor and is submitted to the Engineer to claim for the work that has been conducted for a specific period. As per the Sub-Clause 14.3 of FIDIC Red Book, [Application for Interim Payment Certificates], the IPA shall consist of 

A)    Estimated Contract Value of the works executed with the supporting documents produced up to the end of the specified period. 

a.      Value of work done under BOQ

b.      Value of Dayworks conducted.

c.      Value of variation.

B)    Additions

a.      80% of the cost of material on site

b.      Price Escalation

C)    Deductions

a.      Recovery for Mobilization Advance

b.      Retention

c.      Liquidated damages

d.      Total Value of previous certification

A.   Advance Payment and its Recovery

According to Sub-Clause 14.2 of FIDIC Red Book, [Advance Payment], the Employer has a responsibility to provide a sum for advance payment for the purpose of mobilization in exchange for the Contractor’s guarantee. Prior to receiving the Advance Payment, the Contractor has the responsibility to provide the Performance security as per Sub-Clause 4.2 [Performance Security]. The amount for this will be expressed either as a sum or as a percentage.

Further, during each payment made to the Contractor, this amount will be recovered through percentage reductions from the value of Work done. Usually, the total amount is recovered when the certified value of work done attains 90% of the Initial Contract Price (without Provisional Sum). Since the BOQ and the Initial Contract Price is an estimate for the work to be carried out the 10% is kept as a buffer/ safety factor. 

B.     Retention Money and its Release

The retention money is deducted as per Sub-Clause 14.3 and released as per Sub-Clause 14.9 [Payment of Retention]. Generally, the deduction amount is equal to a percentage of the Interim Payment amount. The deduction is carried out until the value mention in the Contract Data is reached. This money will be released to the contractor in two parts:

1. After receiving the Taking over certificate
2. After the Defect Notification Period