Recently, the Ministry of Finance issued the notice on improving the relevant measures for the settlement of construction project prices, which will come into effect on August 1, 2022, and the proportion of progress payment will be increased to 80%.

Prior to this, the Interim Measures for settlement of construction project price stipulated that the Contractor shall apply to the employer for payment of project progress payment, and within 14 days, the employer shall pay the contractor the project progress payment at the rate of not less than 60% of the project price and not more than 90% of the project price. In specific practice, the employer often agrees to pay only about 70% of the project progress payment in the contract.

Due to the low proportion of project progress payment, with the continuous expansion of enterprise scale and the continuous increase of large and extra large construction projects, construction enterprises need to pay more and more funds in advance; In addition, construction enterprises still need to pay four types of deposits in project construction, and they have been faced with the problems of "difficult settlement" and "difficult collection" for a long time, resulting in the increasing amount of accounts receivable and higher financial costs. These have seriously squeezed the working capital of construction enterprises, raised the asset liability ratio of enterprises, and seriously squeezed the survival and development space of enterprises.

Recently, the Ministry of Finance issued the notice on improving the relevant measures for the settlement of construction project prices, which will come into effect on August 1, 2022. The project contracts signed from this date shall be implemented in accordance with this notice. It is specified that the progress payment for construction projects of government organs, institutions and state-owned enterprises shall not be less than 80% of the price of completed projects.

Original document

CJ [2022] No. 183

The relevant departments of the Party Central Committee, ministries and commissions under the State Council, all institutions directly under the State Council, the general office of the Standing Committee of the National People's Congress, the general office of the National Committee of the Chinese people's Political Consultative Conference, the Supreme People's court, the Supreme People's Procuratorate, the central committees of democratic parties, relevant people's organizations, enterprises under the central management, the finance departments (bureaus) of provinces, autonomous regions, municipalities directly under the central government and cities specifically designated in the state plan, the housing and urban rural development departments (committees, management committees and bureaus), the Finance Bureau Housing and Urban Rural Development Bureau:

In order to further improve the relevant measures for the settlement of construction project prices, maintain the order of the construction market, reduce the burden of construction enterprises, and protect the rights and interests of migrant workers, in accordance with the financial rules for capital construction (Order No. 81 of the Ministry of Finance), the Interim Measures for the settlement of construction project prices (CJ [2004] No. 369) and other relevant provisions, the relevant work is hereby notified as follows:

1、 We will increase the proportion of progress payments for construction projects. The progress payment of construction projects of government organs, institutions and state-owned enterprises shall not be less than 80% of the price of completed projects; At the same time, on the premise that the total estimate (budget) and final (settlement) of the project are not exceeded, in addition to the quality guarantee not exceeding 3% of the total project price as agreed in the contract, the proportion of progress payment can be determined by the employer and the contractor according to the actual situation of the project. In the process of settlement, if the progress payment exceeds the actual completed project price, the Contractor shall return the excessive progress payment to the employer within 30 days after settlement.

2、 The process settlement can be implemented for the new projects that started in the same year and cannot be completed in the same year. According to the contract, the employer and the Contractor shall divide the construction process into construction periods according to time or progress nodes, calculate, confirm and pay the price of the completed and undisputed quantities (including changes, visas, claims, etc.) within the period, and the payment amount shall not exceed the approved estimate (budget) corresponding to the completed part. The process settlement documents confirmed by both parties are an integral part of the completion settlement documents. In principle, they will not be reviewed again after completion.

3、 This notice shall come into force as of August 1, 2022. The project contract signed from this date shall be executed in accordance with this notice. In addition to the matters specified in this notice, other relevant matters shall continue to be implemented in accordance with the Interim Measures for settlement of construction project price (CJ [2004] No. 369).