FIDIC reference
Sub-Clause 14.2 — Advance Payment
An interest-free mobilisation “loan” against a bank guarantee, repaid by deductions from IPCs.
Applies in: Red BookYellow BookSilver Book
The Employer pays a mobilisation advance (and, in Yellow/Silver, a design advance) where the Contract Data so provides — but only against an Advance Payment Guarantee for the full amount. The advance is repaid through percentage deductions from interim payments, and the guarantee amount may reduce as repayment progresses. On termination before full repayment, the balance becomes immediately due. Tender practice: check the currency, repayment schedule and guarantee release trigger — the usual Particular Conditions battlegrounds.
Key points
- Paid only against an Advance Payment Guarantee.
- Repaid via percentage deductions from IPCs.
- The guarantee may reduce as repayment progresses.
- On termination the balance is immediately repayable.
How this works in practice
An advance payment is a loan, not a gift, and three parameters decide whether it helps: the amount, the repayment schedule and the conditions for releasing the guarantee. A recurring problem on regional projects is that the advance is paid late while the schedule for recovering it from interim payments does not shift: the Contractor is effectively repaying money it barely received. Second, the advance payment guarantee should reduce as repayment progresses; otherwise the Contractor keeps full security in place against an already-repaid sum and pays bank commission for nothing.
Common traps
- The recovery schedule is tied to the calendar rather than to the date the advance was actually received.
- The advance payment guarantee does not reduce in step with repayment — bank commission is overpaid throughout.
- The advance is conditional on documents whose composition the contract describes only vaguely, and payment drags on for months.
Versions: 1999 → 2017 → 2022
- 1999
Sub-Clause 14.2 with equivalent advance and guarantee mechanics.
- 2017
Restructured into sub-paragraphs (guarantee, certification, repayment) with clearer wording.
- 2022
No substantive change in the 2022 reprint.
Clause FAQ
Which FIDIC books use Sub-Clause 14.2?
The clause applies in Red Book, Yellow Book, Silver Book. Particular Conditions may change the standard risk allocation, so always check the project contract.
How is an advance payment normally recovered?
Most often by percentage deductions from each interim payment, starting once cumulative certified value passes a stated threshold and running until full recovery by a defined percentage of completion. The specific percentages and thresholds are Contract Data entries, and it is those, not general theory, that shape the project cash flow. Model them at tender stage.
What happens to the advance on termination?
The unrepaid balance normally becomes immediately due and enters the final accounting between the parties. That is why the advance payment guarantee is often the first instrument called on termination. The practical lesson for a contractor is to track the outstanding balance continuously rather than only at the end: it is a direct measure of the risk the project carries at any given moment.
Related clauses
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Reference material, not legal advice. Always check your contract and the Particular Conditions.