Advance Payment Guarantee (APG)
A bank guarantee securing an advance payment made to the contractor at the start of a project. It reduces in value as the advance is recovered through deductions from interim payments.
The advance is working capital: it funds mobilisation, early procurement and the long-lead deposits that a contractor otherwise finances itself. The guarantee is what makes the employer willing to hand it over before any work exists.
The mechanic that gets mismanaged is the reduction. As the advance is recovered from interim payments, the guarantee should reduce in step — and if nobody actively manages that, the contractor is paying bank charges on a guarantee securing money it has already repaid. It is a small, silent, entirely avoidable leak that runs for the length of the project.
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