Advance on materials
To help the Contractor’s cash flow it is normal to pay an advance amounting to 75% of
the value of construction materials brought to the site and not yet incorporated in the
works. For the purpose of the Contractor’s monthly statement a survey is carried out to
determine the actual value of the materials on site at the end of the month in question. In
this way account is taken of increases caused by new consignments of materials and
decreases due to materials being incorporated into the works. After the advance has been
paid, the materials become the property of the Employer.
Mobilization advance
The advance, paid at the outset of the construction, will appear in full in each of the
Contractor’s monthly statements. The mobilization advance is paid back progressively by
the Contractor according to rules laid down in the contract, so that at completion of the
project the whole advance has been deducted in the monthly statements.
Liquidated damages
Liquidated damages is an amount of money to be paid by the Contractor to the Employer
for losses incurred by him when the Contractor fails to complete the project on time. The
amount to be paid will be defined in the contract documents and is normally in the order
of 0.05% of the contract sum per day the contract period is over-run. In some countries it
is customary to set a ceiling on these deductions, for example 10% of the contract sum.
Interest for late payment
It is becoming increasingly common to compensate the Contractor in the event of
payments being made after the time limit laid down in the contract, e.g. 45 days. This
compensation would normally be tied to the country’s bank lending interest rate.
Amount payable
The accumulated sum of all the above-mentioned items will give the gross amount
payable to the end of the period covered by the monthly statement. The net amount
payable for the current month is found by subtracting the amount paid under the last
statement.
Payment certificate
The Contractor must present his monthly statements to the Resident Engineer as soon as
possible after the expiry of the month in question. The supervision organization will then
check the statement and issue a payment certificate within a given period of time,
typically 30 days. The Resident Engineer is authorized to make corrections if there are
errors or if certain works are not up to specified standard, but he is not allowed to
withhold the payment certificate. After the payment certificate has been signed it will be
forwarded to the Employer for payment.
