Consulting services on latest construction contract advance rates

Article overview

Advance construction contracts are an essential financial solution that helps contractors have timely capital to implement projects. With professional consulting services, businesses can optimize the advance payment process, thereby ensuring construction progress and improving capital use efficiency. In the article below, Long Phan will provide information about the latest advance rates for construction contracts for businesses today.

Construction contract advance limit
Construction contract advance limit

What is a construction contract advance?

An advance on a construction contract is an amount of money that the contractor advances without interest to the contractor, in order to carry out the necessary preparations before implementing the work under the contract.

Construction contract advance conditions include:

  • Advances can only be made after the construction contract takes effect.
  • For construction contracts, a site clearance plan is required as agreed in the contract.
  • The principal must receive an advance payment guarantee (if any) corresponding to the value of the agreed amounts.

In addition, it can be understood that a construction contract advance is an interest-free advance payment to the contractor, made when the contract takes effect and meets the conditions of the site clearance plan and guarantees advance money.

CSPL: Clauses 1, 2, 3 of Decree 37/2015/ND-CP, amended and supplemented by Decree 50/2021/ND-CP.

Current construction contract advance level

The current construction contract advance level is regulated as follows:

Advance limit: The advance amount does not exceed 30% of the contract value at the time of signing (including provisions, if any).

Approval of higher advanced level:

  • If a higher advanced level is needed, it must be approved by the investment decision maker.
  • For projects decided by the Prime Minister, the higher advanced level is decided by the Minister, Head of ministerial-level agency, or Chairman of the Provincial People’s Committee.

Minimum advance level:

  1. Consulting contract:
  • 15% of contract price for contracts > 10 billion VND.
  • 20% of contract price for contracts ≤ 10 billion VND.
  1. Construction contract:
  • 10% of contract price for contracts > 50 billion VND.
  • 15% of contract price for contracts from 10 billion to 50 billion VND.
  • 20% of contract price for contracts < 10 billion VND.
  1. Technology equipment supply contracts and other types of construction contracts: 10% of contract price.

Advance agreement exceeding the minimum level: If the parties agree on an advance payment higher than the minimum amount, the excess amount will not be subject to price adjustment from the time of advance payment.

Advance recovery process: Advances are recovered gradually through payments, the recovery level must ensure that all advances are recovered when the payment value reaches 80% of the signed contract price.

CSPL: Clause 5, Article 18 of Decree 37/2015/ND-CP, amended and supplemented by Decree.

Regulations on advance limits
Regulations on advance limits

Why do you need to use construction contract advanced consulting services?

Consulting on construction contract advances requires in-depth professional knowledge of the Law on Construction. Using the contract advance consulting service will bring customers the following benefits:

  • Ensuring legal compliance: Consulting helps parties clearly understand legal regulations related to advances, avoiding violations of contracts and laws.
  • Reasonable advance rate: Consulting services support determining the reasonable advance rate and in accordance with regulations, ensuring benefits for both parties.
  • Risk management: Consulting helps evaluate and manage risks related to advances, protecting the interests of the principal and contractor.
  • Optimize cash flow: Consulting supports financial planning and effective advance recovery, helping to maintain stable cash flow during contract implementation.
  • Dispute resolution: Consulting services can help resolve disputes that arise related to advances, through providing necessary knowledge and guidance.
  • Enhance collaborative relationships: Using consulting services can help improve communication and relationships between parties, facilitating the contract implementation process.
  • Save time: Professional consulting helps shorten the time to prepare and carry out procedures related to contract advances.
Benefits of using consulting services
Benefits of using consulting services

Construction contract advance consulting service in Long Phan

Construction contract advances are not only a necessary form of financial support but also the key to promoting project progress and efficiency. With a team of experienced professionals in the field of consulting, Long Phan provides in-depth consulting services, including:

  • Consulting on legal regulations related to contract advances.
  • Support in analyzing and determining a reasonable advance level based on contract value and related factors.
  • Consulting on financial planning for advances and recovery of advances, ensuring stable cash flow for the project.
  • Analyze potential risks related to advances and take preventive measures.
  • Support in drafting and adjusting provisions related to advances in construction contracts.
  • Providing mediation services or representing parties in the process of resolving disputes related to contract advances.
  • Monitor the advance payment process and prepare periodic reports on the financial situation and progress of contract implementation.

Construction contract advance consulting services at Long Phan play an important role in ensuring that the parties involved effectively and legally carry out the contract. These services not only help optimize the advance and recovery process but also minimize risks and disputes that may arise during project implementation. For detailed advice on appropriate advance level construction contracts suitable for your project, please contact Long Phan via the hotline: 0906735386.