Interim Payment Certificate (IPC) allow the client to make payments to the contractor before the work is completed. According to the Housing Grants, Construction, and Regeneration Act, a party to a construction contract for more than 45 days is entitled to interim or stage payments.
What is Interim Payment Certificate?
“Interim Payment Certificates” means a payment certificate issued under the Clause “Contract Price and Payment”, other than the Final Payment Certificate.
In other words, it provides a mechanism for the client to make payments – usually milestone-based – to the contractor before the works are complete.
How Interim Payment Certificate Works?
Interim payments can be agreed upon in advance and paid at specific milestones, but they are more commonly regular payments based on the value of work completed (this is the actual value of the work completed, taking into account variations, etc.).
The amount of these payments is recorded on an interim certificate (generally valued by the cost consultant, possibly with advice from the lead designer), and the client is required to honour the certificate within the time frame specified in the contract.
If the client intends to pay a different amount than what is shown on the interim certificate, they must notify the contractor of the amount and the basis for its calculation (pay less notice – see Housing Grants, Construction and Regeneration Act for more information).
The value of interim certificates is equal to the value of the completed work less any amounts already paid and less retention. Half of this retention will be released upon practical completion certification, and the other half will be released upon the issuance of a certificate of making good defects.
Interim certificates should specify the amount of retention, and a statement detailing retention for nominated subcontractors, if any, should be prepared. The contract may stipulate that retention be kept in a separate bank account and be certified. In this case, the client will typically retain any interest earned on the account.
There may be a specific provision to include the cost of particularly expensive materials that the contractor has not yet delivered to the job site. This allows the contractor to order items in a timely manner without incurring unnecessary long-term costs, but it does put the client at risk if the contractor becomes insolvent.
The amounts certified as payable on design and build projects may be based on a contract sum analysis.
The contract conditions state that whether or not the contractor has issued an interim [payment] application, the contract administrator must issue an interim certificate within five [calendar] days of the due date. The Housing Grants, Construction Regeneration Act 1996, as amended by the Local Democracy, Economic Development, and Construction Act 2009, establishes a five-day [calendar] period. The time period cannot be changed because it is mandated by law.
