Progress payments
Paying a contractor for work completed so far, not all at once at the end.
A progress payment is money the board pays a contractor for work already completed on a capital project, not a lump sum due only when the whole job is finished. The contractor documents completed work against the contract's schedule of values, and the board, often with a design professional, verifies the claimed amount before paying.
Why payment happens in stages
Most capital projects run for months, and no contractor can afford to wait until the end to get paid for materials and labor already delivered. Instead, the contract sets a payment schedule tied to progress: the contractor periodically submits an application asking to be paid for the value of work completed since the last payment.
The design industry has a standard pair of forms for this. AIA's application and certificate for payment, used with its companion continuation sheet, is described by its publisher as providing:
"Convenient and complete forms on which the contractor can apply for payment and the architect can certify that payment is due."
Source: Instructions, G702 Application and Certificate for Payment, American Institute of Architects
Your association's contract may use these AIA forms, a comparable form from another publisher, or a simpler invoice. What matters is the underlying idea: the contractor asks for money tied to completed work, and someone checks the claim before the board pays.
What the schedule of values actually breaks down
A schedule of values is the itemized breakdown of the contract sum used to measure progress, line item by line item: so much for site work, so much for framing, so much for the roof. Each payment application reports what percentage of each line is complete, and the total due is calculated from that breakdown, not from a single lump figure.
This is where board judgment matters most. Paperwork can say a line item is complete when it is not. Before approving a payment, someone, ideally the architect, engineer, or manager overseeing the project, should confirm the application against what is actually visible on site.
Who is authorized to certify a payment application, and whether that certification is required by your contract, varies by project and by governing document. Check your construction contract for who signs off before the board pays.
Retainage and change orders change the number due
Two things routinely adjust what a payment application actually asks for. Retainage is a percentage of each payment withheld until the contractor reaches substantial or final completion, protecting the association if the contractor fails to finish or fails to pay its subcontractors. The percentage withheld and when it is released vary by contract and by state; see Retainage for how to find your own terms.
Change orders do the opposite: they add to what is owed. A change order is:
"An official change of any kind in the original scope of work or terms of a construction contract agreed to by the owner, contractor, and project designer."
Source: Change Orders, Associated General Contractors of America
Once the board approves a change order, it should be reflected in the schedule of values so the next payment application prices it correctly, rather than showing up as an unexplained increase.
Check yourself
Answer before you read the explanation, recalling it is what makes it stick.
The contractor submits an application for payment claiming 40 percent of the contract is complete. What should the board do before approving payment?
A schedule of values lists site work as fully complete, but the board's own site visit shows only half of it finished. What should the board do?
Midway through a reroofing project, the board approves adding attic insulation that was not part of the original contract. How should this affect the next payment application?
Sources
- Instructions, G702 Application and Certificate for Payment, American Institute of Architects
- Change Orders, Associated General Contractors of America
Capital Projects
Next, see how retainage keeps a slice of every payment in reserve until the work is truly done.
Retainage percentages and release timing, whether state prompt-payment law sets a payment deadline, and who is authorized to certify a payment application all vary by state and by your construction contract.