Advance Payment GuaranteeAPG

In construction and supply contracts, the employer often pays a mobilisation advance so that the contractor can buy materials and equipment and start work. To protect this money, the employer requires an advance payment guarantee for the same amount.

As the contractor performs, the advance is usually recovered from interim payment certificates, and the guarantee amount can be reduced accordingly (a reducing guarantee). If the contractor fails to perform or misuses the advance, the employer claims the unrecovered amount from the bank.

The guarantee generally becomes effective only when the advance is actually received by the contractor, often credited to an account with the guaranteeing bank, which allows the bank to monitor use of funds.

For banks, an APG carries higher risk than a bid bond because the money has already been paid out, and the risk depends on how the advance is used. Banks therefore assess the contractor's execution capacity and may require the advance to be routed through them.

In Nepal, mobilisation advances and the related guarantees are common in public works under the Public Procurement Act, 2063.

निर्माण तथा आपूर्ति सम्झौतामा ठेकेदारलाई सामग्री र उपकरण किनी काम सुरु गर्न रोजगारदाताले परिचालन पेस्की दिन्छ र त्यसको सुरक्षाका लागि बराबर रकमको अग्रिम भुक्तानी जमानत माग्छ।

काम अघि बढ्दा अन्तरिम बिलबाट पेस्की कट्टा हुँदै जान्छ र जमानत रकम घटाउन सकिन्छ। ठेकेदारले काम नगरे वा पेस्की दुरुपयोग गरे असुल नभएको रकम बैंकबाट दाबी गरिन्छ।

जमानत प्रायः पेस्की ठेकेदारले वास्तविक रूपमा प्राप्त गरेपछि मात्र प्रभावकारी हुन्छ र रकम जमानत दिने बैंककै खातामा जम्मा गराइन्छ। रकम पहिल्यै दिइसकिने भएकाले यसको जोखिम बोलपत्र जमानतभन्दा बढी हुन्छ। नेपालमा सार्वजनिक निर्माणमा यो सामान्य हो।