Progress Payment

Progress payments are interim payments made to contractors during contract performance based on costs incurred or percentage of completion before delivery and acceptance of contract items. Progress payments provide contractor financing by converting incurred costs to cash, reducing working capital requirements. FAR Subpart 32.5 governs progress payments based on costs, typically at 80% of costs incurred for large businesses and 85% for small businesses. Progress payments are not payments for accepted supplies or services but rather financing mechanisms secured by the government's interest in contractor work-in-progress. Progress payments require submission of progress payment requests with cost certifications and are subject to reduction for deficient performance or cost overruns.