What Is an Advance Rate?

Advance payment concept

Prepayment deduction point

The prepayment of project money must be stipulated in the contract. The usual methods of rebate:

(1) After the contractor completes the accumulated amount to a certain percentage of the total contract price (as agreed in the contract between the two parties), it shall be deducted in equal installments or equal deductions. It can also be dealt with according to the actual situation of the project. For example, some projects have shorter construction periods and lower construction costs, and do not need to be deducted in installments. Some projects have longer construction periods, such as multi-year projects. The prepayment period is very long. Not deducted.

(2) The value of the main materials and components required for the construction project that have never been completed will be deducted when the value of the project advance payment is equal to the amount of the project advance payment. Deducted. Among them, the calculation formula of the buckling point is as follows:

T = PM / N

In the formula, Tthe deduction point, that is, the accumulated completed project value at the time when the project's prepaid material reserve begins to be deducted;

Mthe amount of advance payment for the project;

Nthe proportion of main materials and components;

PTotal amount of contracted engineering contract.

For example: the contract price of a project is 1 million, the amount of pre-paid materials is 200,000, and the proportion of main materials and components is 80%. Q: How much is the starting point? According to the calculation formula of the deduction point: T = PM / N = 100-20 / 80% = 750,000 yuan. When the amount of the project is 750,000 yuan, the prepayment for this project will be deducted.

If it is stipulated in the contract that the project quality warranty is deducted proportionately from the contractor's monthly project payment, the starting point of the project advance payment shall be T = P (1-K) -M / N, where,

Tstarting point, that is, the accumulative amount of project payable (accumulated amount of completed work-corresponding quality guarantee deposit) for the deduction of advance payment

Kquality warranty rate;

Mthe amount of prepaid materials;

Nmain material, proportion of component;

Ptotal value of the contracted project (or value of construction and safety workload) ^[1] .

For example: the contract price of a certain project is 1 million, the amount of pre-paid materials is 240,000, the proportion of main materials and components is 60%, the quality warranty is 10% of the contract price, and the contractor receives the monthly project payment Detained in proportion. Q: How much is the starting point? Calculated according to the deduction point: T = P (1-K) M / N = 100 (1-10%)-24/60% = 500,000 yuan, when the project payable is 500,000 yuan (corresponding to the completed work) When the amount is 50 / (1-10%) = 550,600 yuan), the advance payment of this project will be deducted.