Ministry of Finance and Ministry of Construction, Settlement of Construction Project Monies Tentative Measures

Issued: October 20 2004
Effective: as of date of promulgation
Applicability: The Measures apply to all settlement of construction project monies within the PRC. If it is otherwise provided by state laws and regulations, such state laws and regulations shall prevail (Article 2). In case of a conflict between the content of the contract model text and the Measures, the latter shall prevail (Article 28).
"Settlement of construction project monies" refers to agreement on monies for construction project contracting contracts, and settlement of project prepayment, progress payment and completion payment in accordance with the contract (Article 3).

Main contents: The employer and contractor may, in the course of concluding the contract, opt for one of the following for the stipulation on project monies: (1) fixed total amount; (2) fixed per unit price; or (3) adjustable price (Article 8). Where an alteration in project design involves price adjustment, the contractor shall, within 14 days after the confirmation of such alteration, bring this out to the employer, and the contract price shall be adjusted subject to the examination and verification of the employer. Where the contractor fails to report the price adjustment of the project, the employer may, on the basis of acquired information, determine whether or not to adjust the contract price and the actual amount of adjustment (Article 10). Prepayment for projects covering labour and material cost shall be appropriated as stipulated in the contract, and the proportion of prepayment shall, in principle, be not less than 10% and not more than 30% of the contract amount. Under the premise that construction conditions are met, the employer shall pay the project prepayment within one month upon the conclusion of contract by both parties or no later than seven days before the stipulated date of commencement of the project (Article 12). According to the confirmed project metrology result, the contractor shall apply to the employer for progress payment, and the employer shall pay the contractor the progress payment of not less than 60% and not more than 90% of the project price (Article 13). The employer shall, on the basis of the completion settlement report, pay the contractor the settlement payment for completion, retaining approximately 5% as quality assurance (warranty) deposit, which shall be settled after one year of the quality assurance period after the delivery of the project for use (unless otherwise stipulated in the contract); and any fees for repairs occurring within the quality assurance period shall be deducted from the quality assurance (warranty) deposit (Article 14). After completion of the project, both the employer and contractor of the project shall immediately settle the completion payment, otherwise such project is not allowed to be delivered for use and the relevant department may refuse to handle its ownership registration (Article 21).
Related legislation: PRC Contract Law, Mar 15 1999, CLP 1999 No.4 p19; PRC Construction Law, Nov 1 1997, CLP 1998 No.1 p6;PRC Invitation and Submission of Bids Law, Aug 30 1999, CLP 1999 No.8 p34; PRC Budget Law, Mar 22 1994, CLP 1994 No.4 p4; PRC Government Procurement Law (Revised in 2014) and PRC Budget Law Implementing Regulations, Nov 22 1995, CLP 1996 No.1 p4