What are progress payments in construction contracts primarily based on?

Progress payments in construction contracts are primarily based on completed work milestones. This payment structure allows contractors to receive funds as specific portions of the work are completed, thus aligning the flow of cash with the actual progress of the project. By tying payments to milestones, both the contractor and the client have a verification method for assessing that the contracted work matches the payments being made. This system incentivizes productivity and ensures that the contractor is compensated for work as it is done, rather than waiting until project completion, which can strain financial resources.

This approach also provides clarity and reassurance to both parties; the project owner can see tangible evidence of work completed before disbursing funds, while the contractor can maintain cash flow as the project progresses. In summary, the completion of work milestones serves as the foundation for progress payments in construction contracts, facilitating a balanced financial arrangement throughout the duration of the project.