Understanding Interim Payment in the Construction Industry: Clause 14.3 of the FIDIC Contract

Asad Ali

Wed, 30 Jul 2025

Today we will discuss Clause 14.3 of the FIDIC Red Book 2017 contract. Clause 14.3 primarily deals with applications for interim payment, which is a crucial aspect for anyone with experience in quantity surveying. They understand the importance of interim payments because this is how contractors receive payments for the work executed on site, showing the amount, they are entitled to for that specific month.

Key Points of Clause 14.3:

1. Submission of Payment Statement: The contractor must submit a payment statement, also known as a payment application, to the engineer. The engineer here refers to the consultant. This submission should be done after the payment period stated in the contract data or at the end of each month.

If a specific date is mentioned in the contract data, that must be followed. If no date is provided, the contractor should submit the payment application by the end of each month.

2. Payment Statement Format: The payment statement must be in a format acceptable to the engineer. At the start of the project, the quantity surveyor will prepare a format for the payment statement and present it to the quantity surveyor from the engineer's side for approval. Once approved, this format will be used throughout the project.

3. Submission of Copies: The payment application must be submitted in one original paper copy, one electronic copy, and any additional copies if required. These could include hard and soft copies as necessary.

4. Details of the Amount Claimed: The contractor should include enough detail and supporting documents in the payment application for the engineer to review. This includes the progress report, ensuring the engineer can verify the amount claimed.

Core Components of the Payment Statement:

The payment statement, also known as the payment application, typically includes the following key elements:

1. Value of Work Done: This refers to the value of work done up to the payment period, including any variations. This is calculated based on the Bill of Quantities (BOQ) and reflects the work executed on site. Any additional work or variations raised by the contractor or employer should also be included.

2. Adjustments for Changes in Laws or Costs: Construction projects often span several years, during which laws or costs may change. These changes—such as an increase in the Value Added Tax (VAT) rate or fluctuations in material costs—should be included in the payment application. This ensures the contractor is reimbursed for additional expenses incurred due to such changes.

3. Deductions for Retention: Retention refers to a percentage (usually 5% or 10%) withheld from each payment, as specified in the contract. This retention is deducted from the total amount each month and will be released upon project completion.

4. Adjustments for Advance Payments: If the contractor has received advance payments, these amounts should be shown in the payment application and deducted as per the repayment schedule outlined in the contract.

5. Plant and Material Costs: The contract may allow the contractor to recover costs for materials and plant used for the permanent works. Since these materials may be used several months later, the contractor must include these costs to maintain cash flow. Once these materials are delivered, ownership transfers to the employer or client.

6. Provisional Sums: Provisional sums are allocated for work where the exact scope or cost is not clear at the time of contracting, such as telecommunications systems. These sums are included in the BOQ but are finalized as the project progresses and actual costs become clearer.

7. Release of Retention Money: Once the work is completed, half of the retention money is released to the contractor. The remainder is released 365 days after the completion date, provided all contractual obligations are met.

8. Deductions for Employer-Provided Utilities: Any utilities or services provided by the employer, such as generators or cabin accommodations, must be deducted from the contractor's amount.

9. Deductions for Previously Certified Amounts: Finally, the contractor must deduct amounts that have already been certified in previous payment applications to ensure they only receive payment for the current month’s work.