FAR 52.232-5—Payments under Fixed-Price Construction Contracts.
Plain-English Summary
FAR 52.232-5 is the standard payment clause for fixed-price construction contracts, and it governs how the Government pays the contractor as the work progresses and at final completion. It covers the basic obligation to pay the contract price, monthly or more frequent progress payments, what must be included in a progress payment request, when the contracting officer may count materials delivered to the site or certain off-site materials, the contractor certification that must accompany each request, the contractor’s duty to refund unearned amounts if a payment was based on nonconforming work, retainage rules when progress is unsatisfactory, title and risk-related effects of progress payments, reimbursement of performance and payment bond premiums, and the conditions for final payment. In practice, this clause is the main cash-flow mechanism for construction contractors, but it also protects the Government by tying payment to acceptable work, documentation, subcontractor payment compliance, and the contracting officer’s oversight of progress. It matters because payment can be delayed, reduced, or clawed back if the contractor’s request is unsupported, if work is deficient, if subcontractors are not being paid properly, or if retainage is justified. For contracting officers, it provides the tools to verify progress, manage retainage, and protect the Government’s interests; for contractors, it sets the documentation and certification burden needed to get paid on time.
Key Rules
Pay the contract price
The Government must pay the contractor the contract price as provided in the contract. This is the baseline payment obligation, but it is implemented through progress payments and final payment procedures rather than a single lump-sum payment.
Monthly progress payments
The Government must make progress payments monthly as the work proceeds, or more often if the contracting officer allows. Payments are based on estimates of work accomplished that meets the contract’s quality standards and that the contracting officer approves.
Detailed payment substantiation
Each progress payment request must include itemized amounts by contract work element, amounts earned by each subcontractor, total subcontract amounts, amounts previously paid to each subcontractor, and any additional supporting data the contracting officer requires. The contractor must be able to show exactly what work supports the request.
Materials and preparatory work
The contracting officer may include material delivered to the site and preparatory work in the payment estimate. Off-site materials may also be included only if the contract specifically authorizes it and the contractor proves title has passed and the materials will be used on the contract.
Required contractor certification
A certification must accompany each progress payment request, or payment cannot be made. The certification confirms the request is only for contract-compliant performance, that subcontractors and suppliers have been paid from prior payments and will be paid timely, that the request does not include amounts the prime intends to withhold from subs or suppliers, and that the certification is not final acceptance of subcontractor performance.
Unearned amount refund duty
If the contractor later discovers that a certified request included payment for nonconforming performance, it must notify the contracting officer and repay interest on the unearned amount unless it corrects the deficiency or offsets the amount in a later request within the specified time.
Retainage for poor progress
If satisfactory progress is not being made, the contracting officer may withhold up to 10 percent of the payment. Once progress becomes satisfactory, the contracting officer should pay in full, and when the work is substantially complete, withheld funds should be reduced to only what is needed to protect the Government.
Separate completion without retainage
When a separately priced building, public work, or other division of the contract is completed and accepted, payment for that completed portion must be made without retaining a percentage.
Government title and reserved rights
Materials and work covered by progress payments become the Government’s sole property when paid for, but this does not relieve the contractor of responsibility for the work or waive the Government’s right to require full contract performance.
Bond premium reimbursement
If requested, the Government must reimburse performance and payment bond premiums after the contractor shows full payment to the surety. Retainage does not apply to the portion of progress payments attributable to bond premiums.
Final payment conditions
Final payment is due only after completion and acceptance of all work and presentation of the required final documentation under the contract. The clause signals that final closeout is separate from progress billing and depends on full contract completion.
Responsibilities
Contracting Officer
Approve progress payment estimates, determine whether work meets quality standards, decide whether to authorize more frequent payments, require supporting data, determine whether off-site materials may be included, assess whether progress is satisfactory, apply retainage when justified, release withheld funds when appropriate, and compute interest on unearned amounts under the clause.
Contractor
Submit accurate and substantiated progress payment requests, include the required certification, ensure subcontractors and suppliers are paid in accordance with the clause and applicable law, notify the contracting officer if a certified request included nonconforming work, repay or offset unearned amounts with interest as required, and provide evidence needed to recover bond premiums.
Subcontractors and Suppliers
Receive timely payment through the prime contractor’s progress payment process, and rely on the prime contractor’s certification and payment flow for amounts due under subcontract agreements.
Government
Pay the contract price through progress and final payments as required, protect its interests through retainage and approval controls, reimburse eligible bond premiums when properly requested, and make final payment after completion, acceptance, and required submission of final documentation.
Practical Implications
This clause is a cash-flow clause as much as a compliance clause: contractors usually depend on monthly progress payments to finance labor, materials, and subcontractors, so incomplete backup or a missing certification can delay payment quickly.
The subcontractor-payment certification is a common trouble spot. If the prime has not paid prior amounts due to subs and suppliers, or is improperly withholding amounts, the progress payment request can become noncompliant and expose the contractor to payment problems and potential disputes.
Retainage is discretionary only when progress is unsatisfactory, but it can materially affect project cash flow. Contractors should document progress carefully and address schedule or quality issues early to avoid withholding.
Off-site materials are not automatically payable. Contractors should confirm the contract specifically allows them, prove title has passed, and show the materials will actually be used on the job; otherwise the contracting officer may exclude them from the estimate.
The clause does not transfer all risk to the Government just because title passes on progress-paid items. Contractors remain responsible for the work and for correcting damaged or nonconforming work, so payment does not equal acceptance.
Official Regulatory Text
As prescribed in 32.111 (a)(5) , insert the following clause: Payments under Fixed-Price Construction Contracts (May 2014) (a) Payment of price . The Government shall pay the Contractor the contract price as provided in this contract. (b) Progress payments . The Government shall make progress payments monthly as the work proceeds, or at more frequent intervals as determined by the Contracting Officer, on estimates of work accomplished which meets the standards of quality established under the contract, as approved by the Contracting Officer. (1) The Contractor’s request for progress payments shall include the following substantiation: (i) An itemization of the amounts requested, related to the various elements of work required by the contract covered by the payment requested. (ii) A listing of the amount included for work performed by each subcontractor under the contract. (iii) A listing of the total amount of each subcontract under the contract. (iv) A listing of the amounts previously paid to each such subcontractor under the contract. (v) Additional supporting data in a form and detail required by the Contracting Officer. (2) In the preparation of estimates, the Contracting Officer may authorize material delivered on the site and preparatory work done to be taken into consideration. Material delivered to the Contractor at locations other than the site also may be taken into consideration if- (i) Consideration is specifically authorized by this contract; and (ii) The Contractor furnishes satisfactory evidence that it has acquired title to such material and that the material will be used to perform this contract. (c) Contractor certification . Along with each request for progress payments, the Contractor shall furnish the following certification, or payment shall not be made: (However, if the Contractor elects to delete paragraph (c)(4) from the certification, the certification is still acceptable.) I hereby certify, to the best of my knowledge and belief, that- (1) The amounts requested are only for performance in accordance with the specifications, terms, and conditions of the contract; (2) All payments due to subcontractors and suppliers from previous payments received under the contract have been made, and timely payments will be made from the proceeds of the payment covered by this certification, in accordance with subcontract agreements and the requirements of Chapter 39 of Title 31, United States Code; (3) This request for progress payments does not include any amounts which the prime contractor intends to withhold or retain from a subcontractor or supplier in accordance with the terms and conditions of the subcontract; and (4) This certification is not to be construed as final acceptance of a subcontractor’s performance. __________________________________________________ ( Name ) __________________________________________________ ( Title ) __________________________________________________ ( Date ) (d) Refund of unearned amounts . If the Contractor, after making a certified request for progress payments, discovers that a portion or all of such request constitutes a payment for performance by the Contractor that fails to conform to the specifications, terms, and conditions of this contract (hereinafter referred to as the "unearned amount"), the Contractor shall- (1) Notify the Contracting Officer of such performance deficiency; and (2) Be obligated to pay the Government an amount (computed by the Contracting Officer in the manner provided in paragraph (j) of this clause) equal to interest on the unearned amount from the 8 thday after the date of receipt of the unearned amount until- (i) The date the Contractor notifies the Contracting Officer that the performance deficiency has been corrected; or (ii) The date the Contractor reduces the amount of any subsequent certified request for progress payments by an amount equal to the unearned amount. (e) Retainage . If the Contracting Officer finds that satisfactory progress was achieved during any period for which a progress payment is to be made, the Contracting Officer shall authorize payment to be made in full. However, if satisfactory progress has not been made, the Contracting Officer may retain a maximum of 10 percent of the amount of the payment until satisfactory progress is achieved. When the work is substantially complete, the Contracting Officer may retain from previously withheld funds and future progress payments that amount the Contracting Officer considers adequate for protection of the Government and shall release to the Contractor all the remaining withheld funds. Also, on completion and acceptance of each separate building, public work, or other division of the contract, for which the price is stated separately in the contract, payment shall be made for the completed work without retention of a percentage. (f) Title, liability, and reservation of rights . All material and work covered by progress payments made shall, at the time of payment, become the sole property of the Government, but this shall not be construed as- (1) Relieving the Contractor from the sole responsibility for all material and work upon which payments have been made or the restoration of any damaged work; or (2) Waiving the right of the Government to require the fulfillment of all of the terms of the contract. (g) Reimbursement for bond premiums . In making these progress payments, the Government shall, upon request, reimburse the Contractor for the amount of premiums paid for performance and payment bonds (including coinsurance and reinsurance agreements, when applicable) after the Contractor has furnished evidence of full payment to the surety. The retainage provisions in paragraph (e) of this clause shall not apply to that portion of progress payments attributable to bond premiums. (h) Final payment . The Government shall pay the amount due the Contractor under this contract after- (1) Completion and acceptance of all work; (2) Presentation of a properly executed voucher; and (3) Presentation of release of all claims against the Government arising by virtue of this contract, other than claims, in stated amounts, that the Contractor has specifically excepted from the operation of the release. A release may also be required of the assignee if the Contractor’s claim to amounts payable under this contract has been assigned under the Assignment of Claims Act of1940 ( 31 U.S.C.3727 and 41 U.S.C. 6305 ). (i) Limitation because of undefinitized work . Notwithstanding any provision of this contract, progress payments shall not exceed 80 percent on work accomplished on undefinitized contract actions. A "contract action" is any action resulting in a contract, as defined in FAR subpart 2.1 , including contract modifications for additional supplies or services, but not including contract modifications that are within the scope and under the terms of the contract, such as contract modifications issued pursuant to the Changes clause, or funding and other administrative changes. (j) Interest computation on unearned amounts . In accordance with 31 U.S.C. 3903(c)(1) , the amount payable under paragraph (d)(2) of this clause shall be- (1) Computed at the rate of average bond equivalent rates of 91-day Treasury bills auctioned at the most recent auction of such bills prior to the date the Contractor receives the unearned amount; and (2) Deducted from the next available payment to the Contractor. (End of clause)