Progress billings and payments:
Payment is the valuable control tool in your hands. You should ensure that progress payments are determined objectively and designed to promote timely performance by contractor. The key rules which apply here are:
- You should guard yourself against early payment and overpayment as it is risky.
- You should not unreasonably delay or withhold earned payment which will lead to risk of contractor?s dissatisfaction which manifests as quality compromise or time delay.
- Prompt and accurate contractor invoices and timely payments are critical to the financial status of the contractor.
- It is prudent to involve both personnel responsible for contract formulation and personnel responsible for contract administration in designing payment terms. It should be noted that contracts invariably stipulate percentage retention (usually 10% of progress bill value). The purposes served by the retention are motivating the contractor to complete the work; covering the risk of latent errors or omissions; encouraging contractor to rectify deficiencies after a planned demobilisation.