Progress Payment (Construction)

A progress payment is an interim payment made while work is still under way — monthly or less frequently — based on costs actually incurred, with a percentage held back until completion.

What it is

A progress payment is an interim payment made while a contract is still being performed — usually monthly — before the work is complete and the final invoice is rendered. In federal procurement the framework is the SACC Manual: clause H1003C (Progress payments) is the active standard clause, and the standard contract language states that "Canada will make progress payments in accordance with the payment provisions of the Contract, no more than once a month, for cost incurred in the performance" of the work.

How they work

Under SACC clause H3007C (Method of Payment – Progress Payments), progress payments are made monthly or less frequently, up to a stated percentage of the costs and charges actually incurred, with the contract holding back a stated percentage until completion — the Canadian-federal analogue of the holdback that provinces require on construction contracts. The supplier submits a claim — historically on form PWGSC-TPSGC 1111 (Claim for Progress Payment) — with the SACC invoicing clauses H3022C or H3024C governing what supporting documentation must accompany the claim. Any overpayment resulting from progress payments must be refunded promptly to Canada.

Progress payments vs. milestone payments

PSPC policy treats a milestone payment as a form of progress payment: instead of paying on costs incurred, the government pays when defined milestones in the Schedule of Milestones (SACC H4012C) are achieved — with clauses H3009C (subject to holdback) and H3010C (not subject to holdback) covering the two variants. Progress payments based on costs suit long-duration work such as construction and systems integration where monthly cash flow matters; milestone payments suit deliverables-driven projects.

Common questions

Do progress payments apply to construction contracts?

Yes — federal construction contracts use the same progress-payment machinery, with holdback rates set in the contract's payment provisions. Provincial construction acts (like Ontario's Construction Act) add their own holdback and prompt-payment rules on top for provincially regulated work.

What happens at final completion?

Held-back amounts are released once the work is certified complete — on many construction projects that certification point is substantial performance, and the final payment reconciles all progress payments already made against the total contract price.

Related definitions

Retainage vs. holdback · Substantial performance · Change order (construction)