Utah Contractor Practice Exam

What is it called when payment is released based on the completion of specific parts of a project?

1. Partial Payments

2. Retainage

3. Full Payment

4. Progress Payment

The correct answer is: Progress Payment

When payment is released based on the completion of specific parts of a project, it is known as a progress payment. This method of payment allows contractors and subcontractors to receive compensation at various stages of a project rather than waiting until the project is entirely finished. Progress payments are essential in construction as they help maintain cash flow, ensuring that labor and materials are funded throughout the project duration. This approach is particularly beneficial for lengthy and complex projects, where the total cost is substantial and full payment at the end would create financial strain on the contractor. Instead of lump-sum payments, progress payments are typically calculated according to the percentage of work completed or milestones achieved, thus aligning payment with the actual workflow and project advancement. Other options, such as partial payments, may seem similar but do not specifically imply payment based on project milestones. Retainage refers to a portion of the payment withheld until project completion to ensure all work is done satisfactorily, and full payment signifies payment of the entire project cost after completion, which does not consider ongoing work assessment. Thus, the term progress payment accurately describes the structured approach to compensating contractors during a project's lifecycle.