What is a necessary criterion for progress payments under contract financing?

Progress payments under contract financing are typically linked to the achievement of specific contract milestones. Confirmed completion of these milestones serves as a tangible indicator that work is being completed as agreed upon in the contract. This approach helps to ensure that payment is commensurate with the amount of work done, thus providing a clear and structured method for managing cash flow throughout the project.

When milestones are established, they often represent significant stages of project development, allowing for incremental payments. This helps maintain both the financial health of the contractor and the integrity of the contractual obligations. Without such a criterion, it would be challenging to validate that the contractor is adhering to the agreed timeline and deliverables, making it necessary for progress payments to be contingent upon confirmation of milestone completion.

The requirement for evidence of incurred costs or completion of the entire project, while pertinent in some contexts, does not provide the same structured approach for regular payments during the project lifecycle. Similarly, written approval by the contractor might refer to procedural steps but does not inherently establish a basis for progress payments tied to actual work completed.