Running Account Bill (RA Bill)

A Running Account (RA) Bill is the periodic payment claim submitted by a contractor during contract execution for the value of work completed to the date of submission. It is the primary payment mechanism for Indian government works contracts, processed through joint measurement, engineer certification, accounts wing verification, and treasury payment, a cycle that typically takes 30-90 days in functioning departments.

What is a Running Account Bill in government procurement?

In an item-rate government contract, the contractor does not receive lump-sum milestone payments. Instead, work is measured periodically, typically monthly, and payment is made for the quantity of each BOQ item actually completed, at the contracted unit rate. The RA Bill is the formal claim document encapsulating this periodic payment.

The RA Bill process follows a defined sequence:

Measurement: The contractor and the government's site engineer jointly measure the work done since the last RA Bill. Measurements are recorded in the Measurement Book (MB), which is a controlled government document with numbered pages. Entries in the MB are signed by both the contractor's representative and the government engineer.

Bill preparation: The contractor prepares the RA Bill using the MB measurements, applying contracted rates to each quantity measured. The bill also shows cumulative quantities and amounts billed to date under each item.

Engineer certification: The Junior Engineer (JE) checks the bill arithmetic. The Assistant Engineer (AE) or Engineer-in-Charge reviews the bill against the MB, verifies that measurements are correct, applies any rate corrections, and certifies the bill for payment.

Accounts processing: The certified bill goes to the accounts wing. Deductions are applied: Security Deposit (2.5-5 percent), income tax TDS (2 percent), GST TDS (2 percent), and any recovery of advances. The net payable amount is computed.

Treasury payment: The net amount is paid through the government treasury, typically by RTGS to the contractor's bank account. In well-managed central government projects, this takes 30 days from bill certification. In some state PWDs, it takes 6-12 months.

The "running account" concept means each RA Bill is a claim for cumulative work done to date, less amounts already paid in previous RA Bills. This prevents disputes about what was included in a previous bill.

Why it matters for bidders

RA Bill payment is the contractor's working capital lifeline. The gap between spending money on material, labour, and equipment, and receiving payment through the RA Bill cycle, must be financed by the contractor. This financing cost, often 2-4 percent of the RA Bill value per month of delay, is a critical project cost that must be included in overhead pricing.

Payment delays are the most prevalent source of contractor distress in Indian government projects. A contractor running Rs 10 crore of monthly RA Bills with 90-day payment cycles has Rs 30 crore of receivables tied up at any time. At a financing rate of 12 percent per annum, this is Rs 3.6 crore per year in interest, the difference between profit and loss on a marginally priced contract.

Understanding which departments and states pay reliably is a critical go/no-go factor. Track record matters: contractors with institutional memory of a specific PWD's payment habits apply appropriate risk margins in their bids.

Example

A contractor on a Rs 15 crore CPWD building project submits RA Bill No. 4 for work done in the 10th week through the 13th week. The Measurement Book records: 1,200 cum of M25 RCC at Rs 9,800/cum = Rs 11.76 lakh; 800 MT of TMT steel at Rs 68,000/MT = Rs 54.4 lakh; 3,500 sqm of brick masonry at Rs 2,200/sqm = Rs 7.7 lakh. Total bill value Rs 73.86 lakh. After deductions, 2.5 percent SD (Rs 1.85 lakh), 2 percent TDS (Rs 1.48 lakh), 2 percent GST TDS (Rs 1.48 lakh), net payable is Rs 69.05 lakh. CPWD's accounts wing processes payment within 28 days by RTGS.

Key rules / thresholds

• GFR 2017 and contract conditions require payment within 30 days of bill certification.
• Security Deposit deduction: 2.5-5 percent of each RA Bill.
• Income tax TDS under Section 194C: 2 percent (companies).
• GST TDS: 2 percent (1 percent CGST + 1 percent SGST) on GST-inclusive bill value above Rs 2.5 lakh.
• Measurement Book entries must be jointly signed, unsigned entries are not the basis for payment.
• After reaching the SD cap, subsequent RA Bills are paid without SD deduction.