Progress Payment

Progress payment is a periodic instalment paid to a contractor or supplier as work advances, calculated against the value of work certified as properly completed during each measurement interval, so the supplier does not have to finance the entire contract from its own capital until handover.

What is Progress Payment?

In works and long-term supply contracts financed by development banks or public authorities, progress payments are the normal mechanism for keeping a contractor solvent through multi-year delivery. At each agreed interval, usually monthly, the contractor submits a payment application showing the volume of work completed, materials delivered, or services rendered. An engineer or contract administrator certifies what is acceptable, and the employer pays the certified amount less any retention and any outstanding advance recovery. The World Bank, ADB, and most other MDB standard contract forms prescribe this cycle explicitly.

Progress payments differ from milestone-payment arrangements in that they are based on measured quantities of completed work rather than on reaching a defined output or event. The two can coexist: a contract might pay progress on unit-rate items and milestones on specific deliverables. Either way, each payment certificate is a legal document that the employer must honour within the payment period stated in the contract, typically 28 to 56 days, and late payment usually triggers interest at a specified rate under FIDIC and similar forms.

Why Progress Payment matters for bidders

Cash flow is the practical constraint that determines whether a contractor can sustain a large contract without distress. Modelling the expected payment timing against your spend curve before you bid tells you whether the contract is self-financing or whether you need a working capital facility. When reviewing solicitation documents, check the payment interval, the retention percentage, and the period for honouring certificates. A contract that pays every 28 days with 5 percent retention is very different from one that pays every 90 days with 10 percent retention, and both affect your cost of finance and therefore your competitive price.

FAQ

What is the difference between progress payment and advance payment?

An advance-payment is paid before work begins to fund mobilisation; progress payments are made periodically during execution against certified completed work.

What is retained from a progress payment?

A retention percentage, commonly 5 to 10 percent, is withheld from each progress payment certificate and released later, partly at substantial completion and partly at the end of the defects liability period.

What happens if the employer is late certifying or paying?

Most standard contract forms entitle the contractor to financing charges on the overdue amount, and persistent non-certification can form grounds for a claims-and-disputes process.