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Advance Payment Recovery

Corporate Law Discussions

Advance Payment Recovery

Postby Barde » Thu Dec 01, 2016 7:02 am

Dear Sir,

FIDIC 99 says" AP recovery shall commence when the total of certification exceed the 10% of Contract Price.

According to above clause, first recovery should be calculated from the cumulative value or only from the current month value. lease clarify using below small example.Assumed that AP recovery 10% a. Contract Price= 10,000,000

b. 10%=1,000,000

c.total certified to date= 12,000,000

d. current month value of work done= 3,000,000

01: First recovery should be calculated from  12,000,000 work done or 3,000,000 work done?

I have experience a situation, if I calculate first recorey from cumulative amount, there is possibility of current month certification to be negative?

Thanks in advance

Pete
Barde
 
Posts: 47
Joined: Fri Jan 31, 2014 12:26 pm

Advance Payment Recovery

Postby Bowdyn » Sun Dec 04, 2016 10:45 pm

Dear Pete,

Thanks for your question.

Let me first mention that the above clause you mentioned has assumed that the advance payment granted under the contract is 10% of the contract sum and that is the reason for stating the equivalent percentage in the recovery. However, the scenario you gave in your question have some challenging figures. Firstly, considering the contract price you stated as 10,000,000; i assume that the advance payment released to the contractor is 1,000,000 which means 10% of the contract sum. Again, guess you must mistakenly inserted the 12,000,000 amount as the amount of total certified to date or rather, you intend to communicate that there has been variation of additions to the contract which has made total certification above the contract sum. Allthesame, if the current monthly value of workdone is 3,000,000 then, it means, already the recovery of the advance payment must have been completed in previous certificates statement and so, when the full advance payment has been recovered in any certificate(for example, let us say in certificate no 7), then, in certificate no 8(assume that, it certificate no 8 is the one with total certified to date of 12,000,000) then, it means the advance statement recovery deduction therein(in the certificate no 8) would only stated full 100% recovery of the advance payment sum and not as 10% of the total valuation then at such time. It means therefore that the total gross valuation of work done on certificate no 8 would have been 13,000,000 from which 1,000,000 of the advance payment has been fully recovered. Remember that, at this time, the recovery of the advance payment would NOT be 10% of 13,000,000 but instead, it would be 100% of 1,000,000. The summary of my answers to your question is that, the deduction for the recovery of advance payment is made by using the equivalent percentage of the advance released multiplied by the gross valuation of workdone(original work+m.o.o.s) and when the full recovery is reached, then, deduction of further recovery automatically stopped.

Hope this helps?

Femi
Bowdyn
 
Posts: 37
Joined: Sat Feb 22, 2014 5:14 am

Advance Payment Recovery

Postby Cadyryeith » Mon Dec 05, 2016 3:48 pm

Dear Sir,

FIDIC 99 says" AP recovery shall commence when the total of certification exceed the 10% of Contract Price.

According to above clause, first recovery should be calculated from the cumulative value or only from the current month value. lease clarify using below small example.Assumed that AP recovery 10% a. Contract Price= 10,000,000

b. 10%=1,000,000

c.total certified to date= 12,000,000

d. current month value of work done= 3,000,000

01: First recovery should be calculated from  12,000,000 work done or 3,000,000 work done?

I have experience a situation, if I calculate first recorey from cumulative amount, there is possibility of current month certification to be negative?

Thanks in advance

Pete
Cadyryeith
 
Posts: 38
Joined: Wed Feb 19, 2014 7:42 am


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