What are Progress Payments based on?

Progress payments refer to the payments made to a contractor as work on a project progresses, serving as a way to compensate the contractor for costs incurred during the completion of the job. This method of payment helps maintain cash flow for the contractor, allowing them to cover expenses associated with labor, materials, and other resources utilized throughout the project duration.

The emphasis on costs incurred means that the contractor submits documentation of expenses and progress made, which is then assessed to determine the appropriate payment amount at each milestone. This process ensures that the contractor has the funds necessary to continue work without financial strain, ultimately helping to keep the project on schedule.

In comparison, other options relate to different aspects of contract payment structures. For example, estimating future costs may not accurately reflect ongoing expenses, fixed fees do not adjust based on actual costs incurred, and payments based on a percentage of completed work can also be influenced by other factors, such as contractual terms or benchmark milestones, rather than strictly reflecting incurred costs.