Protective Measures – Interim or Stage Payments

As with all matters of contract, everything should be clearly set out in writing at the time of tendering to avoid any misunderstandings between parties. It is not possible to go back to a client and request additional paperwork to be inserted into the documents should you discover that you are not comfortable with your proposals having given them more thought!

Once you have agreed the price, and a mobilisation payment has been made, it is advisable to include, at the outset, an expected programme of works, not only time related, but also materials to be supplied. This framework will provide you with a critical path for intermediate or stage payments.

Interim payments may be defined as time related, so that a job projected to run for (say) five weeks, with claim intervals every fortnight, would result in two such invoices i.e. on the second and fourth week of working. (I will be dealing with Final Accounts as a separate issue.)

Stage payments may be best defined as labour and materials on site, up to a given point in the works schedule, as you may well have proportionately higher costs earlier in the project than toward the end. Conversely, a wall @ 1.8m high will not be divisible into two sections of 90cm, as the lower part will be constructed faster than the upper half, due to slower working and the need for a work platform for the second ‘lift’. Every job will have different cost and material requirements at various stages.

However, both stage and/or interim payments should include works completed and materials on site or pre-paid to special order. In other words, the amount of money that the job owes you, as the contractor.

Be careful to include, as part of your Terms, the costs, should there be a significant delay in payments, to the point where you may be obliged to leave site and return at a later date once monies are forthcoming. You need to recognise the amount of money it will cost you for any hiatus in the works, forced through tardy payments.

It is often the case that once a job is nearing practical substantial completion, the contractor may decide to not bother with the final interim payment, and leave it until final invoice. This can sometimes be a very costly mistake!

Imagine you have one week left to finish, and forgo the stage payment request – any delays in the projected final date will extend the period beyond what is comfortable for your cash flow, even more so if the client decides not to settle what is now an enhanced final payment until he/she is happy with 100% of the works. (Or is ill/on holiday/rushed off on a family emergency. Because you have not pursued the interim monies, they assume that you are happy to wait!)