How an interim payment certificate works
On a construction contract running over months, the contractor does not wait until the end to get paid. Each period the contractor submits a statement of the value of work executed and materials on site; the engineer values it, applies the deductions the contract allows, and certifies the net amount due. Under FIDIC Clause 14 that certified amount becomes payable within the payment period stated in the contract data.
The arithmetic is a waterfall, and the order matters:
| Symbol | Meaning |
|---|---|
| W | Value of work executed in the period, measured and valued at the contract rates |
| M | Materials on site (FIDIC 14.5) — only if property has passed to the employer and they are stored and insured |
| A | Adjustments and other additions: price adjustment (FIDIC 13.7), variations, dayworks and certified claims — may be negative |
| Retention | Percentage of the period value withheld under FIDIC 14.9, stopping once the retention limit is reached |
| Advance recovery | Repayment of the advance payment under FIDIC 14.2, commonly 25% of each interim payment until fully recovered |
| Other deductions | Sums due to the employer: damages, amounts paid on the contractor's behalf, corrections of earlier overpayments |
The deduction waterfall, step by step
- Gross value — add work executed, materials on site and adjustments. This is the value the engineer certifies before deductions.
- Retention — multiply the gross by the retention percentage and withhold it, but never more than the remaining headroom up to the retention limit. Once the limit is reached, no further retention is deducted.
- Advance recovery — take the contract recovery percentage of the amount remaining after retention, but never more than the outstanding advance balance. When the balance falls below that percentage, only the balance is deducted and recovery is complete.
- Other deductions — subtract sums due to the employer. A negative net can result only here, if deductions exceed the period's gross value.
- Net certified — the amount payable for the period. The cumulative column is what the employer has actually paid in total across all IPCs.
Retention and advance payment in standard contract forms
| Source | Retention | Advance payment |
|---|---|---|
| FIDIC 1999 Red Book (Cl. 14) | Percentage and limit stated in the contract data (commonly 5%); first half released at taking-over, second half after the performance certificate (14.9) | Amount and repayment percentage in the contract data; default recovery 25% of each interim payment until repaid (14.2) |
| World Bank / ADB Standard Procurement | Typically 5–10% of the contract price, released in stages as sections are completed and accepted | Up to 10–20% mobilization advance against a bank guarantee, amortised against interim payments |
| UK NEC4 | Retention only if an X-clause or secondary option applies; otherwise priced risk instead of retention | Advance payment option with an agreed amortisation schedule per assessment date |
| JCT building contract | Commonly 3–5% of the value of work, released in two moieties at practical completion and after the defects period | Not standard; where agreed, recovered by agreed instalments in interim valuations |
Frequently asked questions
What is an interim payment certificate?
An interim payment certificate (IPC) is the periodic statement in which the engineer values the work executed and materials on site, applies deductions such as retention and advance payment recovery, and certifies the net amount the employer must pay for that period. Under FIDIC Clause 14 the contractor submits a statement, the engineer values it, and payment is due within the period stated in the contract data after the certificate is issued.
How is retention calculated and when is it released?
Retention is a percentage of each interim payment, withheld by the employer as security for completion, and it stops accruing once the total withheld reaches the retention limit stated in the contract data — commonly 5% of the accepted contract amount. Under FIDIC Clause 14.9 the first half is released when the taking-over certificate is issued for the whole or a section of the works, and the second half after the performance certificate is issued at the end of the defects notification period.
How does advance payment recovery work?
An advance payment is a loan against future earnings made at the start of the contract, and it is recovered by deducting a percentage from every interim payment until the full amount has been repaid. FIDIC Clause 14.2 sets the default recovery at 25% of the amount of each interim payment: once the outstanding balance is smaller than 25% of the period amount, only the remaining balance is deducted and recovery stops. This calculator applies that rule period by period and shows the IPC at which the advance is fully recovered.
Are materials on site paid before they are built into the works?
Only if the contract says so and the conditions are met. Under FIDIC Clause 14.5 materials on site are included in interim payments only when the property in them has passed to the employer and they are properly stored, insured against loss or damage and identified as the employer's property. Materials merely delivered but not vested in the employer are usually excluded, so check the particular conditions before including them in a statement.
What can the employer deduct from an interim payment?
Common deductions are retention, recovery of the advance payment, sums the employer has paid on the contractor's behalf such as subcontractor or insurance costs, liquidated damages or other amounts due under the contract, corrections of earlier overpayments, and the employer's share of any agreed price decrease. The engineer certifies the net amount after these deductions, and the contractor can dispute a valuation under the contract's claims procedure.
Working out the escalation side of the same statement? Use the Price Adjustment Calculator for the FIDIC 13.7 weighted-index formula.