Construction contracts usually call for periodic progress payments from the project owner to the constructor. Unless a project is small and of short duration, it is unreasonable to expect a contractor to fully finance the performance of the work to completion. And, the work in place represents value added to the owner's property. The question is, how is that completed work valued and how is the progress payment calculated?

In a case reported this week, progress payments under a fixed-price subcontract were structured in a most unorthodox way: On certain calendar dates, stipulated amounts were to be paid. The payments were not tied, under the terms of the contract, to a percentage of completion or the value of the work in place. The prime contractor refused to make a full payment on a designated date, complaining that the sub was not staffing the job adequately or making sufficient progress. A New York court was left to sort out the respective rights of the parties.

Another case this week involved a contractor's right to be on a list of pre-qualified bidders for a complex construction project. One company attempted to aggregate its past experience on smaller projects in order to qualify. The GAO said that was not permissible. This week's issue also includes a "best practices" piece on the establishment and release of retainage.