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| Sample Interim Payment Application |
Download Sample Interim Payment Application PDF
As
name suggests, it is a payment for the part works or on account payment to the
contractor to facilitate his cash flow in order to avoid bankruptcy. For
example, if a contractor awarded for a 200 million worth of project and there
is no allowance for interim payment application till completion of project,
there will be no cash inflow to the contractor. It make some trouble for the
smoothness of his business. To explain the application process, the following
sample is attached above, but according to different projects application
template will be varied.
In
traditional method of construction, Client, Consultant & Contractor are
main stakeholders of any project. According to industry technical terms, Client
may be known as employer or owner whereas Consultant is known as Engineer. In
Quantity Surveying terms, preparation of interim payment application is known
as valuation.
Contract
sum is defined as amount accepted in letter of acceptance (By Contractor) of
acceptance for execution and completion of the works and the remedying of any
defects. In simple words, this is sum agreed at contract awarded time. It can
be increased or decreased after the real execution. (Scope changes/Variation).
Date
of valuation means the date that payment application considered so far. In
other words, all the value of works done up to that date are claimed in that
payment application. Progress bill number reflects serial number of the
application. These applications can be sent every month or after completion of
certain value of work, etc. That depends on different project and contracts.
Value of the work done is calculated by
multiplication of completed quantities and agreed rate for one unit of work. (Refer
BOQ Sample). Material on site (MOS) refers as the
value of material not installed at site now, but it can be used for very near
future. Contractor can apply for part value of that materials by submitting
invoices to engineer. After the execution of work by using same materials, the
value given for material on site will be deducted for contractor’s amount.
Price escalation means allowance agreed for the
price escalation for major materials (Reinforcement, Cement, etc.).If it is
allowed contractor will not suffer for any price escalation, but once again it
is different to one contract to another.
Variations can be defined as changes to the
original contract. It shall be additions or omissions depends on the changes. Other additions allow to cover any additional costs which
are not covered in heading mentioned above. Subtotal 1 is the addition of the highlighted
items.
Foreign component
& Bank charges are the costs
incurred by employer on behalf of contractor. It should be deducted from
contractor’s account. Sub-total 2 is calculated by Sub-total 1 minus foreign
component and Bank charges.
Retention
is the value of sum retained by employer for any future defects on the work
done by contractor. It is calculated by a certain percentage of work done for
interim payment application. Maximum amount of retention is decided on the
contract sum. Generally it is 5% or 7.5% of the contract sum. Value of material
on site should be excluded for the calculation of retention.
Advance
recovery is calculated by a certain percentage of work done so far till to
cover the advance given to the contractor. Amount previously certified is the
total amount of money certified before this application is made. Other
deductions cover any other additional cost which should be deducted from
contractor’s account. Total deductions is addition of retention, advance
recovery, previous certified payments & other deductions.
Then
finally gross amount is calculated by the difference between sub-total 2 and
total deductions. This will be amount given to the contractor as payment for
particular application. But all these to be justified by proper back-ups.
Otherwise contractor will not be paid the amount as he applied. There is chance
for difference between contractor’s applied amount and engineer’s certified
amount.
Written by Gowrinath © BasicCivilEngineering.com
Written by Gowrinath © BasicCivilEngineering.com
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