FIDIC / Legal Reference: FIDIC Red Book Clause 14.2
An initial payment made by the employer to the contractor at the start of a project to assist with mobilisation costs. The advance payment is repaid through deductions from subsequent interim payment certificates at an agreed percentage rate.
What it means in practice
Under Clause 14.2, the contractor is entitled to an interest-free advance payment of the amount stated in the Appendix to Tender (commonly 10-15% of the Accepted Contract Amount). Before the advance payment is released, the contractor must provide an Advance Payment Guarantee.
Repayment begins when the cumulative amount certified in IPCs reaches a specified percentage of the Accepted Contract Amount and continues at a specified percentage of each subsequent IPC until the full advance has been repaid.
Where disputes arise
Disputes over advance payment arise where: the employer delays releasing the advance despite the guarantee being in place; the repayment calculation is disputed (particularly where Variations have increased the contract value); or the employer calls the Advance Payment Guarantee on disputed grounds.
UAE Context
Advance payment arrangements are common in UAE government contracts. The Advance Payment Guarantee must typically be an unconditional on-demand guarantee from a UAE-licensed bank — the employer can call it without proving default.
Related terms
Advance payment disputes and guarantee management form part of e-Basel’s construction payment advisory services.
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