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Mastering Payment Schedules: A Guide for Project Managers & Progress Claims

Jamie Cerexhe
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Jamie Cerexhe
Oct 7, 2024
Mastering Payment Schedules: A Guide for Project Managers & Progress Claims

As a client side project manager in the construction industry, handling and responding to a progress claim is vital for moving any capital works project forward, reducing risk to your client and improving quality.  

Let's walk you through the process of preparing and issuing a payment schedule in response to a progress claim under the NSW Security of Payment Act.

What is a Payment Schedule?

Under the Security of Payments Act, the principal must respond to a progress claim. If you don't, you may be up for paying the progress claim's full amount! More on that later.

How to Respond to a Progress Claim Under the Security of Payment Act: Client-side project managers must respond appropriately to a progress claim made under the Security of Payment Act.
Client-side project managers must respond appropriately to a progress claim made under the Security of Payment Act.

As such, if you are the client side project manager performing the construction contract administration, a payment schedule is your formal, contractual response to a progress claim. It outlines what you are willing to pay (on behalf of your client) and the reasons for any difference between this amount and the amount claimed.

Steps for Project Managers Preparing a Payment Schedule

Step 1: Review the Progress Claim Thoroughly

Once you receive a Progress Claim, the clocks start, and you have ten business days to provide a payment schedule starting from when you received the payment claim. Make sure you assess the claim's accuracy and completeness. Verify that the claimed work has been completed or the services have been provided as per the contract.

Step 2: Calculate the Payable Amount

After your review, determine the amount you are willing to pay. Depending on your assessment, this could be the full amount of the progress claim, a part of it, or none. Ensure your calculations align with contract terms and conditions.

Step 3: Documenting Reasons for Any Discrepancies

If you decide to provide a payment schedule for less than the progress claim, document specific reasons for each discrepancy. Provide detailed justifications for any amount you are withholding and have good evidence for why.

How to Respond to a Progress Claim Under the Security of Payment Act: Client-side project managers can visit the project site to assess a progress claim.
Client-side project managers can visit the project site to assess a progress claim.

Recommended Step: Make a courtesy call

Tip: It is best to give your contractor a courtesy call before serving them with your reduced payment schedule at the next step. This will ensure they have visibility, allowing you to discuss your issue with their progress claim before serving them. This will build trust.

Step 4: Preparing the Payment Schedule

Prepare your Payment Schedule in writing and address it to the contractor who submitted the progress claim. Make sure you identify the related payment claim (e.g. Progress Claim #10 = Payment Schedule #10 ). Include your detailed reasons for any difference between the claimed and scheduled amounts.

Step 5: Serving the Payment Schedule

Ensure you deliver the payment schedule to the contractor within the timeframe specified by the contract or the Act. Remember, you have ten business days to respond after receiving the Progress Claim. It is best to check the contract on the method of issuing the payment schedule, but most people use Email.

How to Respond to a Progress Claim Under the Security of Payment Act: An example of a payment schedule called a 'payment statement' for a Defence Managing Contractor Contract (MCC-1).
An example of a payment schedule called a 'payment statement' for a Defence Managing Contractor Contract (MCC-1).

Recommended Step: Attach the Progress Claim

It's good practice, and we see a lot of client side project managers who use Mastt, attaching the Progress Claim as 'attachment 1' to the Payment Schedule. It will be a lengthy document, but it keeps all the essential information in one place.

Do you have to submit a payment schedule?

No, you don't have to - but if you don't submit a payment schedule within the allocated time, your client may be liable to pay the full amount of the progress claim. This will make your client unhappy, and likely you won't win the next project with that client. 😂

Other Considerations & the Big Picture

Overall, everyone wants the capital works project to get done as soon as possible. Progress Claims and Payment Schedules are the key steps that occur on a regular and recurring basis on a capital works project, and without them, no one gets paid, and food doesn't get put on the table of people/families working on the project.  

How to Respond to a Progress Claim Under the Security of Payment Act: Client-side project managers have to balance competing truths on a capital project.
Client-side project managers have to balance competing truths on a capital works project.

Be sure to balance the merit of progressing the project, the relationships involved and the costs of what a breakdown over payment understanding might do to your project or client's end capability. Sometimes, the cost of delay isn't worth it.  

Conclusion

Effectively responding to a Progress Claim with a well-prepared payment schedule and seeing the big picture goal of getting the project done is vital for client side project managers. It helps maintain transparent and fair dealings and safeguards against potential financial and legal issues.

Remember, while this guide provides a foundational approach, each Progress Claim is unique and should be dealt with on its individual merits. Consulting with a legal expert in construction law can provide additional guidance and help you navigate complex scenarios.

Disclaimer: While Mastt is dedicated to offering valuable industry insights, it's important to note that we are not legal experts. Therefore, our content should not be interpreted as legal advice. We encourage readers to exercise discretion and seek personalized guidance from qualified legal professionals.
Topic: 
Payment
Jamie Cerexhe

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Jamie Cerexhe

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