- Quantity Surveying and Building Consultancy Services
- 02 9522 6407
Progress Claims in Construction
Cost Summary Report
7 August, 2023
Cost Control in Construction
3 November, 2023
Progress claims are an essential part of the construction process. They allow builders and contractors to get paid for the work they have completed, while also providing clients with a way to track the progress of their project. On this page, you’ll discover reliable information on how to prepare and submit valid progress claims, manage disputes, and get paid on time and in full.
Table of Contents
What Are Progress Claims in Construction?
A progress claim (or in other words, progress payment) is a document submitted by a builder to their client requesting payment for work that has been completed to date, based on an agreed-upon payment schedule.
The timing and frequency of progress claims in construction are regulated by the construction contract among the affected parties. Therefore, progress claims may be made as one-off payments, at regular intervals (monthly or quarterly), or after specific project stages are completed.
Why Are Progress Claims Important?
Progress claims serve several important functions in the construction industry:
- Ensuring a steady cash flow for contractors and subcontractors,
- Facilitating progress tracking throughout the entire project,
- Aiding in dispute resolution,
- Managing the risks associated with delayed payments,
- Assisting contractors in receiving fair and timely payments.
Therefore, progress payments contribute to greater transparency, time and resource management, and promote fairness in construction projects.
What Is the Difference Between Progress Claims and Invoices?
Progress claims and invoices are both utilised to request payments among business parties in the construction industry.
Progress claims are periodic requests for payment for work that has been completed, based on a percentage of the total work.
Invoices, on the other hand, are typically used to request payment for services that have been delivered and include the total service costs.
This is especially common when the project is divided into stages, and the contractor completes each stage in a timely manner. In such cases, the client may simply approve the progress claim and send the payment to the contractor, without requiring a separate invoice.
What is a Payment Schedule?
The payment schedule is a document that outlines the terms and conditions related to progress claims. It typically includes the following information:
- Frequency of Payment: Indicates whether payments are made monthly, or quarterly,
- Payment Amounts: Specifies the amounts to be paid at each instalment,
- Basis for Payment: Defines the criteria for payment, such as project milestones or a percentage of work completed,
- Due Dates: Specifies the date on which each payment is due.
The payment schedule is generally included in the construction contract between the parties involved in the project.
Progress Claim Template
To match with the regulatory standards, a progress claim template can include items such as:
- Project Name
- Project Number
- Contractor Name
- Date
- Payment Claim Number
- Summary of Work Completed (Items, Description, and Percentage)
- Total Claim Amount (Items, Description, Value)
- Previous Payments (Date, Invoice Number and Amount)
- Total Amount Due
- Total Amount with GST
- Signatures (Contractor’s Signature)
- Notes
What Documentation Should a Progress Claim Include?
The specific documentation in a progress claim can vary depending on the construction contract in question. However, some common documents that are a part of in a progress claim are:
- Statement of Work Completed: A detailed report outlining construction work completed within a specific period, including specific tasks or milestones achieved.
- Progress Report: An in-depth overview of the project’s progress, detailing completed tasks, ongoing activities, and upcoming phases.
- Schedule of values: a document that breaks down the total construction project costs into single work items
- Invoices from Subcontractors and Suppliers: Invoices specifying the services provided, including material quantities, labour cost, unit costs, and total cost amounts.
- Photographs as Proof of Work: Visual evidence demonstrating the progress made according to the agreed-upon terms.
- Quality Control Records: Documentation confirming that the work meets required quality standards, such as quality control certificates.
- Certification of Accuracy: Signed documents from authorized bodies verifying the accuracy of the progress claim.
- Payment Schedule: A document outlining specific payment milestones agreed upon by the parties involved.
- Legal Documents: All relevant legal documents, such as licenses and permits, serving as proof that the work complies with local regulations and requirements.
How to Submit a Valid Progress Claim?
To prepare and submit a valid progress claim, you can follow these steps:
- Review the Construction Contract: Construction contracts typically outline payment types, progress claim details (including frequency and timing), required documentation, the amount of work completed, and similar criteria.
- Calculate the Claim Amount: Construction contracts often specify the percentage of completed work necessary to activate the progress claim. Calculate the claim amount based on this criterion.
- Gather Necessary Documentation: As listed in our previous section, collect all required documentation to support your progress claim.
- Prepare the Progress Claim Form: Create a comprehensive progress claim form containing all necessary information required by authorities. Include details such as the date of the claim, the percentage of work completed, and the claim value and basis of the claim. Ensure the form is valid and complete according to the contract specifications.
- Submit the Progress Claim: Submit the progress claim following the procedures defined in the construction contract.
What is a Progress Claim Response?
A progress claim response is a document that typically states whether the client has approved the claim or not. It specifies the approved payment amount and may include comments from the client regarding the claim.
Ignoring a progress claim is not advisable. When clients receive a claim, they can respond in several ways: they can pay the full amount stated in the claim, provide a payment schedule, or pay according to the specified schedule by the due date.
If the claim is denied, clients must provide a clear and detailed explanation for their decision. Alternatively, contractors can seek legal assistance to identify potential errors in the quality of work or if their rights have been violated. In extreme cases, contractors can halt all work on the site.
How to Manage Disputes over Progress Claims?
Disputes over project claims can occur frequently due to various reasons. When disputes arise, it is crucial to manage them effectively and promptly to prevent project delays and escalations that may lead to litigation and court proceedings. Here are some tips on how to manage disputes over progress claims:
- Review the Construction Contract Early: Familiarize yourself with crucial contract terms early on to avoid potential disputes.
- Transparent Communication: Maintain open and timely communication with partners to clearly explain problems and facilitate successful dispute resolution.
- Willingness to Compromise: Be open to compromise; sometimes, it is necessary to reach a successful resolution.
- Consider Mediation: If negotiation fails, seek mediation from third-party sources to help resolve the dispute.
- Seek Legal Advice: If you are unsure about how to proceed, always seek legal help to clarify any confusion regarding the dispute.
- Document Everything: Keep detailed records of all written communications and gather all necessary documentation to support your position.
Australian Construction Laws and Regulations Related to Progress Claims
Australian construction laws and regulations offer a functional framework for progress claims within the industry. The Security of Payment Act, Fair Work Act, and Australian Consumer Law include provisions safeguarding contractors, employees, and consumers from unfair practices.
Construction businesses can foster good business practices by comprehending their rights and responsibilities. Regular submission of progress claims and timely responses improve cooperation. In case of disputes, seeking legal assistance and mediation can lead to a quick and efficient resolution.
Who Can Help You with Progress Claims?
As professionals skilled in assessing and projecting construction costs, registered quantity surveyors offer valuable support to contractors in preparing progress claims. They assist in defining schedules of values, tracking project costs, preparing well-documented progress claims, and providing expert advice on costs and pricing. If you require assistance with your progress claims, please do not hesitate to reach out. With over 20 years of experience in the industry, Property and Building Assessments is here to help you.
- Termination of Construction Contracts - 4 December, 2023
- Cost Control in Construction - 3 November, 2023
- Progress Claims in Construction - 2 October, 2023
