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

Asad Ali

Tue, 10 Jun 2025

Today, we are going to dive into Clause 14.4 of the FIDIC Red Book 2017, which is referred to as the Schedule of Payments. But before we get into the specifics of this clause, let me explain you what a schedule of payments means in the context of construction projects.

As you may already know, construction projects often span long durations—sometimes months, even years—with hundreds of activities involved in completing the work. Now, when it comes to payments, there are two important aspects to keep in mind:

1. The client wants to pay only for the work that has been completed.
2. The contractor, on the other hand, aims to maximize cash flow to cover expenses and generate profit.

The schedule of payments is not tied to monthly cycles. Instead, it is linked directly to milestones. So, what are milestones in construction?

Let’s take the example of a building project. Both the client and the contractor agree on specific milestones, such as the completion of the substructure or foundation. Once this milestone is achieved, the contractor is entitled to submit a payment request for that particular portion of the work.

For instance, once the foundation is completed, the contractor submits a detailed progress report, along with the associated costs. The client then reviews and certifies the payment for that milestone, regardless of how much time has passed since the last payment—whether it’s been a month, a few weeks, or even several months.

Now, let’s look at what Clause 14.4 says:

This clause applies only if the contract includes a schedule of payments. It’s not a mandatory clause, meaning the contract parties can choose whether to include it. If a schedule of payments is part of the contract, the following four key points need to be considered:

1. Installments are estimates: The amounts specified in the schedule are considered estimated values for interim payments, not the actual amounts.
2. Clause 14.5 on Plant and Materials does not apply: We’ll discuss Clause 14.5 in more detail later, but for now, just know that it doesn’t apply when a schedule of payments is in place.
3. Installments are not tied to actual progress: The installments may not perfectly reflect the contractor's actual progress, but any differences should be minor. If there is a significant difference, the engineer has the authority to revise the payment based on actual progress.
4. If no schedule is included: If the contract doesn’t specify a payment schedule, the contractor is required to provide an estimated payment schedule for every three-month period. The first estimate is due 42 days after the start date, and revised estimates must be submitted every three months.

Finally, if no agreement is made on payment schedules, FIDIC provides a default timeline to ensure payments are made at regular intervals, reducing the administrative burden on both parties.

I hope this explanation of Clause 14.4 helps you understand the key points of payment scheduling in construction projects. In the next session, we’ll cover Clause 14.5 and discuss how it relates to payments for plant and materials.