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Progress payments are the ongoing payments that an owner uses to compensate the contractor during a project.  They are typically paid in installments depending on the percentage of work completed or the schedule of values being tracked.

For example, consider the following scenario:

A project Schedule of Values shows Task A worth $12,000, Task B worth $8,500, and Task C worth $25,000. Task A is 18 percent complete, Task B is 2 percent complete, Task C is 7 percent complete. How much should the progress payment be?

Task A - $12,000 x .18 = $2,160

Task B - $8,500 x .02 = $170

Task C - $25,000 x.07 = $1,750

Total =  $4,080

So for this stage of the project the contractor would be due $4080 for work completed thus far.
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Retainage?  Why does that matter?
One of the project topics that we discuss quite often is retainage.  If you have performed work or hired a contractor for services this concept is an important one.  Retainage is a percentage withheld from each progress payment and it is usually calculated at 10%. It provides more of an incentive to the contractors to complete a project.   It also provides the owner an amount of protection against liens, claims, and defaults that can occur near the end of a project. Basically the work should not be completely paid for until it has been completed according to specifications.  It also gives the owner some leverage if there are any conflicts with unmet deliverables.

When a scope is finished enough to justify the retainage payment it is generally referred to as “Substantially Complete.” Typically this is when an owner can occupy the building or when the service or system can be put to use for its intended purpose.
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