MES Updated Notes
MES Updated Notes
5. Payments to Contractors
Payments to contractors are an essential part of the contract administration process, ensuring that contractors receive fair
compensation for their work. Payments are typically based on the completion of certain milestones or upon the submission of
verified invoices.
Key Aspects of Payment Processing:
1. Contract Payment Terms: The contract should specify the payment terms, including the payment schedule, payment
method, and criteria for payment. These terms outline when and how the contractor will be paid, such as at project
milestones, monthly intervals, or upon completion.
2. Payment Certification: After the completion of specific tasks or milestones, the contractor submits a payment request.
The contract administrator, or designated certifier, reviews the request, conducts necessary inspections, and certifies the
payment.
3. Payment Based on Milestones: In most construction contracts, payments are made based on the completion of certain
milestones. For example, payments may be made after completing foundation work, completing structural framing, or
finishing the final inspection. This ensures that the contractor is paid progressively as the work is completed.
4. Interim Payments: For large-scale projects, interim payments (also called progress payments) may be made at regular
intervals, such as monthly. These payments are based on the work completed during that period, and the amount is
determined through a measurement of progress or submission of progress reports.
5. Retention Payments: In many contracts, a retention percentage (typically 5-10%) is withheld from each progress
payment. This amount is held as security to ensure the contractor completes all aspects of the project satisfactorily. The
retention is paid after the project is fully completed, and all conditions are met.
6. Final Payment: Upon completion of the project, the final payment is made to the contractor, which includes the release
of any retention money. Before this payment is made, the contract administrator verifies that the project is completed to
the agreed standards.
7. Deductions: Sometimes, payments may be subject to deductions for incomplete work, penalties, or non-compliance
with contract terms. Any deductions should be well-documented and communicated to the contractor.
8. Dispute Resolution for Payments: In case of disagreements or delays in payment, the contract administrator should
follow the dispute resolution procedures outlined in the contract, such as arbitration or mediation.