Progress Payments
Interim payments throughout construction, known as progress payments, are designed to not only ensure prompt payment to the contractor but also provide an incentive for steady and incremental completion of construction phases. Even though progress payments may be made, the owner will not usually pay one hundred percent of the amount due. Rather, a percentage of the amount due will be rendered with a small portion being withheld until final completion. This works to promote quality in the completed product.
Generally, the provision for progress payments will be included in the parties' contract documents. The contract will specify what the amount of the payments will be based on, and when the payments will be received or what the triggering event will be for a payment. Normally, when progress payments are called for in the contract, the contractor is required to submit an application for a progress payment with payment being due from the owner a specified number of days after submission of the application. Often, requests for payment cover work performed during a month, although a different timeframe could certainly be outlined in the parties' contract. The amount of progress payments is usually determined based on either a percentage of the estimated work or a percentage of the cost of materials.
