A progress payment is a payment made by the client to the contractor during the course of a construction project. Progress payments are based on the work completed to date, assessed by a valuation of the work on site, a site inspection or another means of verifying progress. In UK practice they are usually called interim payments and are made at regular intervals, most commonly monthly.
The purpose of progress payments is to give the contractor regular cash flow to cover its costs as the work proceeds, and to link payment to the actual progress of the project. They also reduce the risk of the contractor being unable to continue the work through lack of funds.
Progress payments are made in instalments, each based on the value or percentage of the work completed. The specific payment terms vary depending on the size and complexity of the project and the agreement between the client and the contractor.
The process of making a progress payment typically involves the following steps:
- Verification of the work completed to date.
- Calculation of the value or percentage of work completed.
- Preparation of a payment application by the contractor.
- Review and approval of the application on behalf of the client.
- Payment of the amount due to the contractor.
Progress payments must be managed carefully so that they reflect the actual progress of the project and avoid both overpayment and late payment. Proper management of progress payments is essential to maintaining a good relationship between client and contractor and to the successful completion of the project.
