Advance Payment

 

1. What are the conditions for payment of advances to contractors?
  Conditions and rates of payment to work contractors are as follows:
  (a) Advance payments are allowed to contractors who undertake work that are invited locally and to the work contractors of design & build and turnkey; and
  (b) The rates are up to 25% of the value of the builder's work or a maximum of RM10 million, whichever is lower for advances to the main contractor. Up to 20% of the work package or a maximum of RM5 million whichever is lower for advances to the Nominated Sub Contractor (NSC).
     
2. What are the conditions that must be met before advance payment can be made?
  Advance payments can be made under the following conditions:
  (a) Letter of Acceptance has been signed and returned;
  (b) Performance bond has been submitted;
  (c) Insurance policies as set out in terms of the contract has been submitted;
  (d) The Contractor produces a Bank Guarantee or Insurance Guarantee or the Finance Company Guarantee or Islamic Bank Guarantee or Takaful Guaranteeor or Development Bank Guarantee that is equivalent to the amount of advances; and
  (e) Guarantee for the main contractor and Named Sub contractor made separately and in accordance with the prescribed value.
     
3. What are the directives on the collection of advance payments?
  The Agency shall recover the advance payment by making a deduction on progress payments based on the stages of work. The repayment period shall not exceed the total contract period. The Superintending Officer shall ensure that deductions for advance payments can be resolved at the latest when the project is 75% completed.To ensure that the advance is collected in an orderly manner, a Register must be maintained to record all recoveries.
   
4. What are the conditions for an advance payment to supply and service contractors?
  Conditions and the rate of advance payment to supply and service contractors are as follows:
   
  Procurement of Supplies
  (a) Advance payments may be made to the contractor of supplies and services and to local manufacturering class contractor;
  (b) The rates are up to 25% of the total contract value or a maximum of RM10 million, whichever is lower;
  (c) The Contractor is required to submit a Bank Guarantee or Insurance Guarantee or the Finance Company Guarantee or Islamic Bank Guarantee or Takaful Guarantee or Development Bank Guarantee equivalent to advance amount; and
  (d) The Agency shall recover the advance payment through a deduction on progress payments in accordance with the supplies that have been delivered. The repayment period shall not exceed the total contract period.
   
  To ensure that the advance is collected in an orderly manner, a Register must be maintained to record all recoveries.
   
  Procurement of Services
  (a) The advance rate is up to 15% of the total contract value or a maximum of RM5 million whichever is lower to the local service providers;
  (b) The Contractor is required to submit a Bank Guarantee or Insurance Guarantee or the Finance Company Guarantee or Islamic Bank Guarantee or Takaful Guarantee or Development Bank Guarantee equivalent to advance amount; and
  (c) The Agency shall recover the advance payment through a deduction on progress payments in accordance with the services that have been rendered. The repayment period shall not exceed the total contract period.
     
  To ensure that the advance is collected in an orderly manner, a Register must be maintained to record all recoveries. For the procurement of consultancy services, consultants are not eligible for advances.