A progress payment refers to a payment made by the owner or client to the contractor during the course of a construction project. Progress payments are typically made based on the percentage of completion of the project as determined by a site inspection or other means of verifying the work completed.
The purpose of progress payments is to provide the contractor with regular cash flow to cover their expenses and to ensure that the project is progressing according to schedule. It also helps to mitigate the risk of the contractor abandoning the project due to a lack of funds.
Progress payments are usually made in installments, with each installment based on a pre-determined percentage of the project’s completion. The specific payment terms may vary depending on the project’s size and complexity and the agreement between the owner and the contractor.
The process of issuing a progress payment typically involves the following steps:
1. Verification of the work completed to date.
2. Calculation of the percentage of completion.
3. Preparation of a progress payment application by the contractor.
4. Review and approval of the progress payment application by the owner or client.
5. Issuing of a progress payment to the contractor.
It’s important to manage progress payments carefully to ensure that they align with the actual progress of the project and to avoid overpayments or delays in payment. Proper management of progress payments is essential for maintaining a positive relationship between the owner and contractor and ensuring the successful completion of the project.
