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Construction Law/FIDIC Yellow Book: Clause 14.2



We are involved with an important infrastructure project in India. The contract is governed by General Conditions from FIDIC Yellow Book 1999.

In the 5th para of Clause 14.2 of FIDIC Yellow Book, does the word 'excluding' used in the phrase 'excluding the advance payment and deductions and repayments of retention' mean 'ignoring' or 'reducing'? For example, if the amount of a Payment Certificate is INR 100,000 and deduction for retention @ 10% is INR 10,000 (No repayment of retention is involved in the Payment Application), would the recovery of Advance be calculated at 25% of INR 100,000 (Gross amount) or 25% of INR 90,000 (Net amount after deducting retention)?

Thanks in advance.


ANSWER: Dear Alok,

Thank you for your question.

In the case indicated under Sub-Clause 14.2, point a), it means that Advance Payment recovery shall only start when value of paid works, "ignoring" or "excluding", or not taking into consideration, the amount of paid advance payment (which is obviously, already received by the Contractor)and any value for retention money.

That means, whatever is with plus (Advance Payment) or with minus (retentions), shall not be taken into consideration for determining the "total of all certified interim payments".

In your example, the amount to be considered is the gross amount of 100,000.

Likewise, if there were any deductions made by the Employer from Contractor's payments, they will not be taken into consideration

Trust that answer your query.

---------- FOLLOW-UP ----------


I felt that if FIDIC had meant the calculation of recovery of advance payment to be on the gross amount, they would not have mentioned the phrase within brackets i.e. 'excluding the advance payment and deductions and repayments of retention'. It would have simply been the amortization rate of 25% of the amount of each Payment Certificate.

Subsequently, I have done some further Google search. I found some earlier answers in this forum. In Mr. Elliott's answer to Neville on 3rd September 2010, he has said that the amount should be based on value of works done to date less retentions and repayments. In Mr. Elliott's answer to Pete on 13th May 2013, he has said that 'Clause 14.2 b is relevant to the calculation of repayment of any advance payment. The repayment is based on the net value of the IPC, excluding retentions and repayments of retentions. In an answer on 30th Jan 2010, Alina Valentina Oprea, another expert on the site, has said that from the amount representing the works done in that month, some amounts are to be deducted, and from that net amount the recovery of advance payment is to be deducted.

I also found an 'Inform Practice Note #16' in respect of Advance Payments on the website of Construction Industry Development Board, the Building Industry regulator of South Africa. The Note is available at the following link:

The calculations of recovery of Advance payment at page 5 of the above Note are on net basis i.e. after reducing Retention amount from Work Done. Of course, the headings of columns pertaining to 'Retention' and 'Total repayment of advance' appear to have been inadvertently interchanged.

There is a book by Mr Coinloorke CE available at the following link:
In FIDIC sub-clause 14.2 - Advance payment (explained), it states that 'The rate of recovery of amortization of Advance payment shall be 25% of each payment certificate sum less retention, deduction and Advance payment sums'.

I have sent an email to FIDIC also but have not received a reply.

Please advise.


ANSWER: Dear Alok,

Thank you for coming back.

Indeed, though I said the same thing, i.e. indicated deductions to be made, I mistakenly referred to the gross amount of 100,000.

If you eliminate that phrase, you get the same point - apologise for misleading you.

But at least, that stirred you to make further researches, which I was quite impressed with.

Good luck!

---------- FOLLOW-UP ----------


Thank you for your prompt response and for bearing with me.

I just wanted a final confirmation before closing the issue. That is, in my example, if the amount of Interim Payment Certificate for the month is INR 100,000 and deduction for retention @ 10% is INR 10,000 (No repayment of retention is involved in this Payment Application), the recovery of Advance would be calculated at 25% of INR 90,000 (Net amount after deducting retention) and not 25% of INR 100,000 (Gross amount of IPC).

Would be grateful if you could kindly confirm.

Thanking you in advance,


Dear Alok,

Thank you for coming back and for giving me the opportunity to have a closer look at the arguments you brought up yesterday.

That because I believe it was yesterday I actually made the mistake.

I'll explain:

1. the IPC for the Advance Payment is "excluded".

2. then, for the subsequent IPCs, value of executed works is calculated  (the GROSS AMOUNT)and out of that, eventual sums to be paid by the Contractor to the Employer, are deducted. With that, we arrive at the net amount that is due to the Contractor for the respective month/ period.

3. from that value, are deducted various percentages for retention, advance recovery, etc.

As such, with all due respect for the experience of the other people you quoted, my opinion is different:

- yes, you do deduct eventual amounts from the total value of works certified in the respective month/ period, as indicated under above point 2. Let's call it the "NET AMOUNT".

- then from that "NET AMOUNT" you deduct the percentages for retention and advance recovery, i.e. out of what remains, you deduct 10% for retention, respectively 25% for advance recovery. You always apply the percentages to the same amount

So, to use your figures, providing there is no amount to be paid to the Employer, the Gross Amount equals the Net Amount (as defined above by me) i.e. 100,000.

Out of that, you deduct the percentages for retention and advance recovery. I stick to my first answer and regret my hasty second answer that was given while doing several other things at the time - apologise.

I hope the above are understood now.

To justify my opinion: Sub-Clause 14.2 says "(b)   deductions shall be made at the amortisation rate of one quarter (25%) of the amount of each Payment Certificate (excluding the advance payment and deductions and repayments of retention) ....".

Obviously, as shown in above point 1, the IPC for the Advance Payment is "excluded", i.e. that clarify what "excluding" means.

As retentions are in the same bracket with the Advance Payment, we can only treat them in the same way in respect of the word "excluding".

I underline, it is my opinion and that is my argument, I appreciate some other people may have other arguments and will be always open to discuss such arguments.

Hope that helps.

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