Progress Claims

Progress claims are the financial heartbeat of any construction project. Every month — or whatever period the contract specifies — the contractor submits a formal request for payment covering work completed during that period. As a developer, you're on the receiving end of these claims, and your job is to assess them critically before releasing funds. Get this wrong and you'll either damage the relationship by underpaying or expose yourself by overpaying for incomplete work.

The monthly claim cycle follows a predictable rhythm. The contractor prepares the claim, usually by the 25th of the month or whatever the contract reference date dictates. They submit it to the superintendent (or project manager acting in that role). The superintendent reviews the claim against the actual work on site, certifies an amount, and issues a payment certificate. You then pay the certified amount within the timeframe the contract requires — typically 15 to 20 business days from the claim date under standard AS 2124 or AS 4000 contracts.

The claim itself should break the contract sum into line items that match the original schedule of rates or bill of quantities. Each line item shows the original contract value, the percentage claimed to date, the cumulative amount claimed, and the amount claimed this period. Good claims also show previously certified amounts so you can see the movement month to month. If your contractor is submitting a single lump-sum number with no breakdown, push back immediately. You can't assess what you can't see.

Assessing a claim properly means comparing what's on paper to what's actually on site. Walk the job. Check that the claimed percentages reflect reality. If the contractor says framing is 80% complete, go and look. Is it actually 80%, or is it 60% with the easy bits done and the complex areas untouched? Pay particular attention to "front-loaded" claims where a contractor overweights early activities to pull cash forward. Compare the claimed percentage against your program — if excavation is claimed at 95% but the program shows it should be 70% complete, ask questions.

The gap between claimed and certified amounts is normal and expected. It exists because the contractor naturally claims on the optimistic side, while the superintendent's role is to certify only work that's genuinely complete and to the required standard. A 5-15% gap on any given claim isn't unusual. But watch for patterns. If the gap is growing month over month, it usually signals one of three problems: the contractor is systematically overclaiming, the scope is poorly defined, or there's a dispute brewing about what constitutes "complete" work. Address it early.

Retention is a standard mechanism that holds back a percentage of each certified payment as security for defect rectification. The typical structure in Australian construction contracts is 5% retention on every payment until the retention fund reaches a capped amount (often 5% of the contract sum), then it drops to zero withholding on subsequent claims. At practical completion, half the retention is released. The remaining half is held until the end of the defects liability period — usually 12 months after practical completion. As a developer, track retention separately from claim amounts. It's money you owe but don't release yet, and it should appear as a liability on your project cash flow.

Security of Payment legislation exists in every Australian state and territory. It gives contractors and subcontractors a statutory right to progress payments, with strict timeframes that override whatever your contract says if those contract terms are less favourable to the claimant. Under the NSW Building and Construction Industry Security of Payment Act 1999, for example, you must provide a payment schedule within 10 business days of receiving a payment claim (or a shorter period if the contract requires it). If you fail to respond within that window, you become liable for the full claimed amount — regardless of whether the work was actually done. The contractor can then pursue adjudication or recovery as a debt. This isn't theoretical. Developers lose adjudications every year simply because they missed a deadline. Set calendar reminders. Track every claim date. Respond to every claim, even if you dispute the amount.

Variations roll into progress claims as additional line items or adjustments to existing ones. Once a variation is approved, its value gets added to the adjusted contract sum, and the contractor can claim against it in subsequent progress claims. Unapproved or disputed variations are trickier — the contractor might include them in a claim, but the superintendent shouldn't certify unapproved variations unless directed otherwise. Watch for contractors burying unapproved variation amounts inside standard claim line items. Always reconcile the total claimed against the original contract sum plus approved variations only.

Cash flow forecasting from claim data is where cumulative tracking becomes essential. Each claim should show the cumulative amount claimed and certified to date, not just the current period. By plotting the cumulative certified curve against your original cost plan, you can see whether the project is tracking ahead or behind on spend. If the S-curve is running significantly above plan, either the work is genuinely ahead of schedule (good) or there's overclaiming happening (bad). If it's running below plan, the contractor may be under-resourcing the job. Either way, the claim data tells you where you stand financially, and it feeds directly into your development cash flow model and drawdown schedule with your lender.

Common overclaiming tactics to watch for include front-loading (inflating early-stage percentages to pull cash forward), claiming for materials stored off-site that you can't verify, percentage leaps that don't match visible progress, and double-dipping on variations already included in the base contract scope. The best defence is consistency: attend site regularly, compare every claim against the previous month's figures, and don't let the superintendent certify anything you haven't verified. If you're not comfortable assessing claims yourself, hire a quantity surveyor to do independent assessments — the cost of a QS is trivial compared to the risk of systematically overpaying a contractor across a 12-month build.