What is an interim payment certificate (IPC) in construction?
An interim payment certificate (IPC) is issued during the contract, before final completion, to certify the amount the contractor is entitled to be paid for a given period. In the Gulf, contractors often call the same cycle a "monthly valuation", "running bill" or "mustakhlas" (مستخلص). Names vary by contract; the mechanics are similar. For a short definition, see the glossary entry on the interim payment certificate.
An IPC is not a gift of cash flow. It is a certified valuation: it says that, in the consultant's view, this much work was done to this standard and this much money is due under the contract terms.
What does an IPC contain?
Exact layouts differ, but most IPCs carry the same blocks:
- Contract summary: original contract value, approved variations, and the revised contract value.
- Work done to date: the value of work completed, usually measured against the bill of quantities (BOQ), item by item.
- Materials on site: where the contract allows payment for materials delivered but not yet installed.
- Less previous certificates: the cumulative total already certified, so this IPC pays only the difference.
- Deductions: retention, recovery of advance payment, and any back-charges or penalties the contract allows.
- Taxes: VAT where applicable, shown according to your contract and local rules.
- Net payable: the amount the client is asked to pay for this period.
How does the IPC process work, step by step?
- Cut-off date. The contract sets (or the parties agree) a monthly or milestone cut-off for measurement.
- Joint measurement. The contractor's quantity surveyor measures work done. Consultant or client representatives witness or check it on site.
- Application. The contractor submits the payment application with supporting measurements, inspection approvals and, where required, material invoices.
- Consultant review. The consultant verifies quantities against the BOQ, drawings and approved inspections, and adjusts anything unsupported.
- Certification. The consultant issues the IPC with the certified amount.
- Client approval and payment. The client's own approval chain releases the payment within the period the contract states.
Check your contract for the time limits at each step. Late certification and late payment often have contractual consequences, and those periods differ between contracts.
How are retention and advance payment deducted?
Retention is a percentage of each certified amount held back by the client as security for defects, then released in stages (commonly part at completion and the rest after the defects liability period). The percentage and the release rules are set by your contract, not by a universal standard.
Advance payment recovery repays the contractor's up-front advance by deducting from later certificates. The contract defines the recovery method, for example a fixed percentage of each certificate.
An illustrative example, with made-up numbers:
| Line | Amount (AED) |
|---|---|
| Gross value of work done to date | 1,000,000 |
| Less previous certificates | (600,000) |
| Value of this period | 400,000 |
| Less retention at an assumed 10% | (40,000) |
| Less advance recovery (assumed) | (30,000) |
| Net before VAT | 330,000 |
To test your own figures, the free IPC calculator and retention calculator handle this arithmetic. They illustrate; they do not replace what your contract says.
What are the most common IPC mistakes?
- Measuring quantities that were never inspected. If the consultant cannot tie a line to an approved inspection, it is the first line to be cut.
- Forgetting variations. Unapproved variations cannot be certified. Chase approval first, see variation orders and how to manage them.
- Cumulative arithmetic errors. Each IPC is cumulative minus previous; a wrong previous total carries forward.
- Mixing up percentage complete and value complete. Lump-sum items need an agreed breakdown or progress basis.
- Missing supporting documents. Contracts often list attachments (inspection requests, test results, invoices). A missing one stops the file.
- Ignoring the cut-off date. Work done after cut-off belongs in the next cycle.
How can you speed up IPC approval?
Most delays are about evidence, not arithmetic. Tie every claimed quantity to an approved inspection or measurement sheet, keep the BOQ clean, submit complete packages, and agree the approval chain in advance so the application is never waiting on one person. For more on how the process works with UAE authorities and clients, read construction payment certification in the UAE.
How does this work in Arkan?
Arkan is construction management software, not an ERP or accounting system. In its Finance module, a payment request is created through a four-step wizard: main information (payment number and period), selection of BOQ items (with the option to import progress from inspection reports), linking of advance payments for recovery, and a preview that summarises the certificate, retention and VAT deductions before the request is submitted into the approval workflow. Retention releases are handled separately. See the Payment Certificates and BOQ modules, or book a demo to see it with your own process.