The new version of the project quality margin management measures introduced margin reserve ratio reduced by two percentage points

Release time:

2017-07-07

The new version of the project quality margin management measures issued.
Margin reservation ratio reduced by two percentage points

In order to implement the State Council's spirit of further cleaning up and standardizing enterprise-related fees, effectively reducing the burden on construction enterprises, and standardizing the management of construction project quality deposits, the Ministry of Housing and Urban-Rural Development and the Ministry of Finance have recently revised the Measures for the Management of Construction Project Quality Margin, reducing the reserved proportion of construction project quality margin from 5% to 3%, a reduction of two percentage points.

According to the new version of the Measures for the Administration of Construction Project Quality Deposit (hereinafter referred to as the "New Measures"), the employer shall specify the contents of deposit reservation and return in the bidding documents, and agree with the contractor on the relevant matters related to the deposit in the terms of the contract, such as deposit reservation, return method, deposit reservation ratio and time limit.

If the performance bond has been paid before the completion of the project, the contractor shall not reserve the project quality deposit at the same time. If the project quality guarantee, project quality insurance and other guarantee methods are adopted, the contractor shall not reserve a deposit.

During the defect liability period, the contractor shall earnestly perform the responsibilities stipulated in the contract; after the expiration, the contractor shall apply to the contractor for the return of the security deposit.

The Employer shall, within 14 days after receiving the application for the return of the security deposit from the Contractor, verify with the Contractor in accordance with the contents of the Contract. If there is no objection, the contractor shall return the deposit to the contractor in accordance with the agreement. If there is no agreement on the return period or the agreement is not clear, the contractor shall return the deposit to the contractor within 14 days after verification, and if it is not returned within the time limit, it shall be liable for breach of contract in accordance with the law. If the Employer does not reply within 14 days after receiving the application for the return of the security deposit from the Contractor, and still does not reply within 14 days after receiving the reminder, it shall be deemed as approving the application for the return of the security deposit from the Contractor.

The new approach also has strict rules on the management of margin reservations. During the defect liability period, for government investment projects that implement centralized payment by the treasury, the management of the deposit shall be implemented in accordance with the relevant provisions of the treasury centralized payment. For other government investment projects, the deposit may be set aside in the financial department or the contracting party. During the defect liability period, if the contractor is revoked, the deposit will be transferred to the user for management along with the assets delivered for use, and the user will act on behalf of the contractor.

If the social investment project adopts the reserved margin method, the issuer and the contractor may agree to place the margin in the custody of a third-party financial institution; the bank guarantee system is implemented, and the contractor may replace the reserved margin with a bank guarantee.

As for the proportion of the reserved margin, the new method stipulates that the contractor shall reserve the margin in accordance with the contract, and the total reserve proportion of the margin shall not be higher than 3% of the total settlement amount of the project price. If the contract stipulates that the contractor shall replace the reserved margin with a bank guarantee, the amount of the guarantee shall not be higher than 3% of the total settlement amount of the project price.

It is understood that the new measures will come into effect on July 1, 2017, and the original "measures for the Administration of quality deposit of Construction projects" will be abolished at the same time. (Source: Ministry of Housing and Construction website)

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