Progress Payments - Price Adjustments - Financial Matters

For contractors, correctly measuring the work performed and requesting payment on time are as important as carrying out the work under public procurement contracts. If progress payments, price adjustments and other financial records are not regularly calculated and claimed, the contractor may receive the payment due late or not at all.

Kılıç Kurumsal Danışmanlık A.Ş. (Kılıç Kurumsal) addresses the progress payments, price adjustments and financial matters of companies that have signed contracts, together with the documentation, time limits, calculation, delivery and acceptance stages. The aim of Kılıç Kurumsal is to help companies manage the contract process in a more measured, documented and predictable manner.

A. Meaning and Importance of Progress Payments, Price Adjustments and Financial Matters in the Contract Process for Contractors

1. What Does a Progress Payment Mean?

A progress payment is the measurement and calculation, at specified intervals, of the work performed by the contractor under the contract and its formalisation in a payment document. The quantity of work completed in works contracts, the services performed in service procurements, and delivery and acceptance records in goods procurements form the basis of the progress payment.

A progress payment is not merely a payment document; it is also the primary record showing which part of the work has been completed, which document has been issued, which deduction has been applied and what amount must be paid.

(See: Progress Payment: https://www.kilichukuk.org/Sozluk/hakedis- )

(See: Progress Payment Report: https://www.kilichukuk.org/Sozluk/hakedis-raporu-- )

2. What Does a Price Adjustment Mean?

A price adjustment is the reflection of changes in costs in the contract price according to specified principles, provided that the contract contains a provision on this matter. The calculation of a price adjustment may vary according to the type of work, the contractual provision, the implementation month, indices and the work programme.

If the price adjustment calculation is not set up correctly from the outset, different results may arise during progress payment periods. An understated price adjustment may result in a loss of receivables for the contractor, while an overstated amount may create a risk of repayment or deduction.

(See: Price Adjustment: https://www.kilichukuk.org/Sozluk/fiyat-farki )

3. Why Are Financial Matters Important in a Contract?

Matters such as guarantees, advances, deductions, penalties, taxes, insurance, stamp duty, progress payment approval, payment periods, new unit prices and final accounts determine the financial balance of the contract. Each of these affects the company's cash flow and the sustainability of the work.

Even if a contract appears profitable on paper, the payment schedule, long waiting periods, missing documents, the application of penalties or an incorrect price adjustment calculation may cause the contractor to incur a loss. Financial matters should therefore be monitored from the first day of the contract by specialists and corporate service providers.

(See: Financial Matters: https://www.kilichukuk.org/sozluk )

B. Our Areas of Expertise in Progress Payments, Price Adjustments and Financial Matters

1. Procedures and Principles for Progress Payment Calculations

When calculating a progress payment, the type of contract and payment method are determined first. Unit-price, lump-sum and mixed contracts, and payment arrangements under direct procurement, cannot be addressed in the same way.

The quantity of work performed is compared with quantity surveys, percentage completion schedules, delivery records, service reports, inspection and acceptance documents, the work programme and the records of the supervision unit. An item included in the progress payment must have the same meaning as the item set out in the contract.

Deductions and set-offs are also reviewed separately. Advance payment set-offs, guarantee deductions, delay penalties, the value of incomplete work, taxes and other financial obligations must be shown clearly. The applicable time limits and record-keeping arrangements must also be monitored so that the contractor can exercise its right to object to a progress payment.

(See: Reference Book: https://www.kilicakademi.com.tr/Kitap/kamu-ihaleleri-yapim-sozlesmelerinde-mali-ve-parasal-konular )

2. Procedures and Principles for Price Adjustment Calculations

The most important consideration in calculating a price adjustment is whether the contract provides for a price adjustment. If a price adjustment is provided for, the applicable principles must be assessed together with the type of work, base index, implementation month, work programme, revised work programme and any time extension.

Where more than one progress payment is prepared within a single month, the indices have not yet been determined, a new unit price is established or the work programme changes, the calculation must be performed with greater care. The calculation steps must be documented and consistent with subsequent progress payments.

Price adjustments for works, services and goods procurements do not begin from the same basis. For each type of procurement, the relevant principles, contractual provision and implementation documents must be read together. An incorrect index, period or quantity of work directly changes the result.

(See: Reference Book: https://www.kilicakademi.com.tr/Kitap/kamu-ihaleleri-yapim-sozlesmelerinde-mali-ve-parasal-konular )

3. Financial Matters in the Contract

During the contract process, not only progress payments and price adjustments but all transactions with financial consequences are monitored. These primarily include increases in work, decreases in work, new unit prices, time extensions, delay penalties, revised work programmes, outstanding items at provisional acceptance, final accounts and the release of guarantees.

Payments to subcontractors, suppliers and personnel should not be considered separately from the main contract. Payments due to the contractor from the contracting authority and payments to be made to third parties should be viewed within the same schedule. Otherwise, the financing burden increases and performance of the work becomes more difficult.

(See: Reference Book: https://www.kilicakademi.com.tr/Kitap/kamu-ihaleleri-yapim-sozlesmelerinde-mali-ve-parasal-konular )

C. Why Should the Contractor's Progress Payments, Price Adjustments and Financial Matters Be Monitored by Specialists?

1. Minor Calculation Errors May Have Major Consequences

Although an incorrect quantity, incorrect item, incomplete measurement or erroneous deduction in a progress payment may appear to be a minor error, it may impose significant costs on the contractor over the contract period. It may not always be possible to correct these errors at the final account stage.

2. Notification Time Limits Must Not Be Missed

Notifications concerning a progress payment report, deduction, new unit price or amendment to the final account must be made on time and in accordance with the correct procedure. An objection submitted after the time limit may not achieve the expected result, even if it is well prepared.

3. Price Adjustments and the Work Programme Must Be Read Together

A price adjustment calculation requires not only the determination of the indices, but also a combined assessment of the work programme, month of performance, revised programme, time extension and progress payment period. This work requires technical and financial expertise.

4. The File Should Be Organised Before a Dispute Arises

Progress payments and financial matters often gain importance when a dispute begins. However, an ideal file consists of orderly records maintained before a dispute arises. Measurements, records, correspondence, calculations and payment records should therefore be kept in the same file and monitored by specialists.

D. How Do We Assist Contractors?

1. Contract and Progress Payment File Review

The contract, specifications, work programme, progress payments, price adjustment schedules, correspondence, acceptance documents and payment records are reviewed together. Missing documents and matters requiring clarification are placed on a separate list.

2. Calculation and Document Consistency Review

The quantities included in the progress payment, unit prices, deductions, price adjustment calculation and payment items are compared. Consistency is sought between the calculation result and the supporting document. Items subject to uncertainty are brought to management's attention.

3. Identification of Time, Deduction and Penalty Risks

Matters such as the delivery date, time extension, delay, period subject to penalties, incomplete work, outstanding items at acceptance and release of guarantees are assessed together with their financial consequences. This enables the company to identify at an earlier stage which transaction affects payment.

4. Preparation of Specific Documents for Submission

Depending on the scope of the engagement, a “Progress Payment Review Note”, “Price Adjustment Calculation Schedule”, “Financial Risk List”, “Payment and Cash Flow Schedule”, “Deduction Review Note”, “New Unit Price Assessment”, “Final Account Preparation List” and “Management Information Note” may be prepared.

5. Guidance to Appropriate Information Sources

Those seeking a brief explanation of the subject may be directed to video content, those wishing to study it in detail to book publications, and those requiring legal information and litigation services to separate information resources.

Kılıç Kurumsal does not replace these resources; it serves as a corporate centre that directs the company to the appropriate resource for its needs.

Video Resource: https://ihale.tv/iletisim

Book Resource: https://www.kilicakademi.com.tr/

Legal Information Resource: https://www.kilichukuk.org/iletisim

E. How Can Companies Obtain Assistance from Us?

1. Specify Your Current Stage

The application should briefly state whether the contract has been signed, the stage reached by the work, whether a progress payment has been prepared, whether a price adjustment calculation has been performed and whether there is a dispute with the contracting authority.

2. Prepare the Initial Documents

Once the scope has been determined, the contract, administrative and technical specifications, work programme, progress payment reports, price adjustment calculations, correspondence, acceptance records, payment records and any objection documents may be shared.

3. Preliminary Assessment

After the initial review, it is determined whether the engagement will consist solely of a progress payment review, a price adjustment calculation, a financial risk review, final account preparation or a broader contract implementation review. The documents to be delivered and the duration of the engagement are set out in writing.

4. Appropriate Timing Prevents Loss of Rights

A review conducted before the progress payment is signed, payment is made, the final account is closed or the release of the guarantee is awaited produces a more reliable outcome. Establishing an orderly documentation and calculation process before the issue escalates prevents the company from losing its rights.

5. Contact

You can submit your application by completing the form on the “Corporate Service Request” subpage under the main “CONTACT” menu of our website.

Contact Details: https://www.kilickurumsal.com.tr/iletisim

Kılıç Kurumsal Danışmanlık A.Ş. conducts its activities from its Ankara headquarters. Meetings may be held face to face or online, depending on the nature of the work. Address: Eskişehir Road (Dumlupınar Boulevard), Mustafa Kemal District, 2079th Avenue, Via Green Business Centre, Block B, Floor: 3/11, Çankaya / Ankara. Telephone: +90 312 285 96 00.