Advanced Payment is very common payment term in the construction projects. However, sometime it is confusing for planning engineers how to reserve their company rights in case the project owner delayed the advanced payment. How to add it in the schedule to impact the project schedule in case of delays? also how to convince the client to approve a time schedule that includes the advanced payment and finally, how to link the advanced payment to the relevant activities in the schedule with decent logic?
Let us create the best scenario to add the advanced payment in our schedule and link it to the relevant activities. Following is the materials procurement for our sample project, please read it and then go to the next paragraph.
As we can see from the picture above, we have 7 materials in our sample schedule. Only three of them are long lead (important, expensive, take long time for procurement) materials and four materials are not long lead. Now the question, if i want to link the advanced payment, what i should see next? Yes exactly, the construction schedule is in the following picture.
In order to have realistic time schedule, Materials Submittals should be linked to Materials Approvals, Materials Approvals linked to Materials Procurement, Materials Procurement linked to Materials delivery, and Finally the materials delivery linked to activities construction. As you can see from the picture above, materials are linked together and linked to the relevant activities which gives us reasonable floats in our time schedule.
Now, where to add the advanced payment? and how to link it to the materials?
As you can see from the picture above, you should have a special section for General Requirements which contains the project important milestones. The best scenario in my opinion to add the advanced payment and get your schedule approved without any issues is by doing the following steps:
1- Create an activity for the contractor to prepare the advanced payment Guarantee letter and be sure if there is certain duration in your contract to be the same.
2- Add a milestone which is linked to the contractor activity ” prepare the advanced payment Guarantee letter ” with proper lag or as per your contract.
3- Now link the advanced payment milestone by the client to the procurement start of the long lead materials and be sure that there is a float (in our sample project we allowed 13 days float).
4- Remember, the float will make the client comfortable, but it will not harm you as a contractor if you delayed the issuance of the advanced payment Guarantee letter, and in that case you as a contractor will get the benefit of the float because the project float who burn it first get it.
5- You showed your client the good intention that the delays of advanced payment will not hold the whole project, but in the same time will protect your company rights.
I hope this sample will make it clear for you how to manage advanced payment in your schedule and you can download the XER file for this sample project for further study from the following link: Advanced Payment Project Sample