Construction Progress Payments, by Corinne Maddox, CCM, CFM

The most important leverage an owner has during construction are the payments. It is critical to avoid paying for incomplete work, although it is standard practice to make a partial payment for materials delivered but not yet installed. A Schedule of Values should be included in the contract as a basis for progress payments. It should include a cost breakdown of the work by trade or other installation category. It should be carefully reviewed to assure that it is not "front loaded", a common practice by contractors to secure early payments. The payment process begins with the contractor submitting an Application for Payment identifying the percentage of completion in each category. The owner's architect or construction inspector should review status of the work and verify or adjust the percentages. It is customary to withhold a retainage (usually 10% of each payment), and that becomes the final payment to the contractor. Retainage is not paid until completion of all punchlist items, and delivery of all product literature, as-built documents, warranties and the Release of Liens. The Release of Liens from general contractor and subcontractors assures subcontractors have been paid, and that there will be no liens filed against your property. If an owner pays for incompleted and unsatisfactory work, he or she will have a very hard time getting the contractor to finish or correct the work.