Construction Contract Payment | Get Paid & Recover Your Entitlements

How Payment Works Under the Contract

Pricing Models and What They Mean for Each Claim

The payment mechanism in a construction contract is shaped first by the pricing model the contract uses. The pricing model determines how the value of completed work is assessed and what the Contractor must demonstrate to support each progress claim.

Payment Mechanisms

Alongside the pricing model, construction contracts include specific payment mechanisms to deal with types of work or cost that cannot be cleanly priced under the main model. These sit within or alongside the pricing model rather than replacing it.

• Provisional sums: An estimated allowance for a defined item that cannot be accurately priced at contract stage. The Contractor is paid the actual cost incurred, adjusted from the provisional sum.
• Prime cost items: Similar to provisional sums but applied to materials or goods specified by type and not yet priced. The Contractor is paid the actual cost plus the agreed margin or handling fee.
• Dayworks: A payment mechanism used for work that cannot be measured or valued under the main pricing model, typically arising from a Principal's direction for work of an indeterminate nature. The Contractor records time, plant and materials on agreed sheets that the Superintendent or Principal's Representative signs off. Dayworks amounts are then claimed in the relevant monthly progress claim at agreed rates. Sheets not contemporaneously signed create disputes at assessment.
• Rise and fall provisions: Adjust the contract price by reference to movements in nominated input cost indices. Where a rise and fall clause applies, the adjusted amount forms part of each progress claim. Where no such clause applies, the Contractor carries the input cost risk.
• Milestone payments: Tie payment to the achievement of defined project stages rather than monthly assessment. Milestones defined by reference to the Superintendent's or Principal's satisfaction introduce significant subjectivity into when payment falls due.

The Superintendent and the Principal's Representative

Under AS4000 and AS4000:2025, after receiving the Contractor's progress claim, the Superintendent must issue a payment certificate within a specified period. The payment certificate sets out the amount certified as due, and the Principal must then pay within the period specified in the Contract Particulars.

The Superintendent holds a dual function: acting as the Principal's agent in administering the contract, and performing the independent certifier role. Under AS4000, the Superintendent is required to act honestly and reasonably when exercising that certifier function. The Principal's Representative is not necessarily the Superintendent, and on many projects contract administration is shared between the Superintendent and other Principal staff.

Where Principal staff who are not the Superintendent are directing how claims are assessed or imposing payment procedures that have no contractual basis, the Contractor is entitled to identify and push back on that interference. Instructions from other Principal personnel that purport to override the Superintendent's certification function are not contractually founded unless the contract expressly provides for them. Whether a Superintendent's progress certificate also constitutes a payment schedule for BIFA purposes was considered by the Queensland Court of Appeal in RHG Construction Fitout and Maintenance Pty Ltd v Kangaroo Point Developments MP Property Pty Ltd [2021] QCA 117. Sofronoff P held at [35] that for a certificate to operate as a payment schedule under BIFA it must state "the amount of the payment, if any, the respondent proposes to make." A certificate that records only an assessed value does not meet that standard.

Preconditions to Payment

Most standard form contracts impose preconditions that the Contractor must satisfy before a progress claim is valid and before the payment period starts running. Understanding those preconditions before the project starts matters because a failure to meet them can delay payment without giving rise to a dispute that can readily be resolved under BIFA.

Under the unamended AS4000:2025, the Contractor submits a progress claim to the Superintendent at the interval agreed in the Contract Particulars, accompanied by documentation sufficient to allow assessment. Under AS2124, still in active use on many projects, the Contractor submits on or before the progress claim date and the Superintendent must issue a payment certificate within the time specified in the Annexure. Under NEC4, the Project Manager assesses payment at each assessment date and the Contractor is not required to submit a claim, though in practice Contractors submit applications for payment to support the assessment.

Common preconditions added through Special Conditions include requirements to provide a statutory declaration of compliance before each payment is released, requirements to provide a cost report or programme update before the claim is assessed, requirements to obtain Principal approval of variations before they can be included in a progress claim, and requirements tied to preceding milestone completion. Where those preconditions are contractual, failing to meet them may delay payment. Where they have no contractual basis, they may constitute the kind of administrative obstruction described in the experience section below.

Claiming Additional Amounts Throughout the Project

Your entitlement under a construction contract is not frozen at the original contract price. Throughout a project, a range of events and circumstances can give rise to additional payment claims, and identifying those entitlements as they arise is as important as managing the monthly claim cycle.

• Variations: Where the Principal instructs a change to scope, timing or method, or where work is carried out outside the agreed scope and qualifies as a variation under the contract.
• Extension of time and delay costs: Where a delay event that is the Principal's risk causes delay to the Works, giving rise to time relief and, depending on the contract, a money claim for prolongation costs.
• Latent conditions: Site conditions that differ materially from those a competent contractor would have anticipated at tender, entitling the Contractor to time and cost under AS4000 and AS4000:2025 provided notice is given promptly after discovery.
• Rise and fall adjustments: On contracts with a price adjustment mechanism, where input cost indices have moved, the adjustment is claimable in the monthly progress claim.
• Provisional sum adjustments: Where the actual cost of a provisional sum item differs from the contract allowance.
• Acceleration costs: Where the Contractor has been directed to accelerate, or has accelerated in response to circumstances that constitute a constructive direction, and has incurred additional costs as a result.
• Disruption costs: Where the Contractor's planned method has been disrupted by Principal-risk events, causing additional costs even where the overall project duration has not extended.
• Suspension costs: Where the Contractor is directed to suspend work, or is entitled to suspend work under BIFA following non-payment, and incurs costs as a consequence.
• Release of retention and performance security: Falling due at contractual trigger points, and must be formally claimed if the Principal does not release it once the trigger has been met.
• Statutory change costs: Where changes in legislation during the project affect the Contractor's cost of performance and the contract allocates that risk to the Principal.

Ways the Principal May Reduce Your Payment Claim

The contract and how it is administered can both reduce what you actually receive against a progress claim. Some reductions are contractual and properly applied. Others are imposed without a proper basis, and understanding the difference matters when you are deciding whether to accept a payment schedule or push back.

Set-Off

Contractual set-off allows the Principal to reduce the amount it pays by reference to a separate amount it claims the Contractor owes under the same contract. Set-off clauses can be drafted broadly. The versions to pay close attention to are those that allow set-off of unliquidated amounts, meaning amounts not yet formally quantified or determined. Two phrasings used in Special Conditions to achieve that result are:

Both formulations give the respondent broad discretion to reduce a progress claim on the basis of an amount that has not been established or agreed. Under the contract, the right to set-off must still be exercised in accordance with the contractual procedure. Under BIFA, a set-off used to reduce the scheduled amount must be identified in the payment schedule with sufficient reasons stated. A set-off raised for the first time in BIFA adjudication, without having been identified in the payment schedule, is generally not available to the respondent.

A related problem is where a Principal reduces a payment without a clear contractual right, providing inadequate reasons in the payment schedule. If the payment schedule fails to identify the contractual basis and the amount of the set-off with sufficient clarity, it may be deficient under BIFA.

Backcharges

A backcharge arises where the Principal incurs costs because the Contractor has not performed a contractual obligation, and seeks to recover those costs by deducting them from a progress payment. Common examples include the cost of cleaning or making safe work the Contractor was required to maintain, charges for shared site services where usage exceeded the allocated amount, and the cost of providing services the Contractor was obliged to supply but did not.

Under the contract, most standard forms give the Principal the right to impose a backcharge provided it has given the Contractor a written notice of the failure, allowed the specified time to remedy, and then incurred the cost of having the work done by others. A payment schedule that states "amount withheld pending resolution of costs associated with Contractor's failure to maintain site cleanliness" without identifying the notice given, the work done by others, and the cost incurred, does not provide the sufficient reason BIFA requires. Backcharges applied without any contractual basis at all may not be supportable in adjudication under the Security of Payment Act, and the payment schedule may be deficient as a result.

Abatement

Abatement is a common law right to reduce payment to reflect the diminished value of work delivered defectively or incompletely. Unlike set-off, abatement does not require a separate counterclaim. It goes to the value of what has actually been provided. Some contracts include provisions that operate similarly to abatement, allowing the Principal or Superintendent to reduce the certified value of work where it does not conform with the contract requirements, without characterising the reduction as a set-off or a separate claim. A respondent who raises abatement, or a contractual value reduction of that kind, in a payment schedule must state that it is doing so with sufficient particularity for the Contractor to understand the basis for the reduction.

Retention

Retention is the percentage of each progress payment withheld as security for the Contractor's performance. Standard form contracts including AS4000 typically set retention at 5% of each certified amount during construction, reducing to 2.5% after practical completion until the end of the Defects Liability Period, up to a cap. Special Conditions sometimes increase those percentages, extend the Defects Liability Period, or impose additional conditions for releasing the second tranche beyond what the standard form requires.

Retention is released in two stages: the first half on practical completion, and the balance at the end of the Defects Liability Period once the Contractor has rectified defects notified during that period. The second tranche is the one most commonly delayed without proper justification. Under BIFA's trust account framework, money held as retention on eligible contracts must be held in a retention trust account, not in the head contractor's general operating funds.

Liquidated Damages

Where the Contractor has not achieved practical completion by the Date for Practical Completion and an extension of time has not been granted covering that period, the Principal may levy liquidated damages at the rate specified in the Contract Particulars. Liquidated damages are most commonly applied as deductions from progress payments and can substantially reduce or eliminate a payment.

The entitlement to levy LDs is not automatic. It depends on whether the Date for Practical Completion was correctly set, whether any act of prevention by the Principal has extended time without a corresponding adjustment to that date, and whether outstanding extension of time claims would, if processed, cover the period in dispute. For detailed advice on liquidated damages and extension of time claims, see our Construction Disputes page.

How to Get Paid When Payment Is Withheld

Where a payment claim is disputed or payment is withheld without a valid payment schedule, the Contractor, Subcontractor, Supplier or Trade Contractor has a range of options. The right option depends on the contract, the amount in dispute, the relationship between the parties, and the time limits that apply under BIFA and the contract.

Before escalating to formal proceedings, most standard form contracts require the parties to attempt direct negotiation or refer the matter to a senior representative for resolution. Under AS4000, that process is triggered by a notice of dispute. Under AS2124 it is a notice of claim. Under NEC4 it is an early warning or a notification to the Project Manager. These contractual processes run alongside, not instead of, BIFA. The statutory adjudication window under the Security of Payment Act continues to run while contractual negotiations are under way, and missing the statutory deadline is not excused by an ongoing negotiation.

Where a payment schedule reduces the claimed amount and the Contractor disagrees, the Contractor can proceed to adjudication under BIFA within 30 business days of receiving the payment schedule. Where no payment schedule is served and the full claimed amount is not paid by the due date, the Contractor can apply for adjudication or seek to recover the amount as a judgment debt, with the respondent's ability to defend the claim significantly restricted. Once an adjudicator issues a determination requiring payment, the respondent must pay the adjudicated amount within five business days. Where they do not, the Contractor can register the adjudicated amount as a judgment debt, give a payment withholding request to the party higher in the contractual chain, or give written notice of intention to suspend work.

Subcontractors also have access to subcontractors' charges under the Subcontractors' Charges Act 1974 (Qld) as a separate statutory mechanism. A subcontractors' charge is lodged over money payable in the chain above the head contractor, requiring amounts otherwise payable to the head contractor to be withheld pending resolution of the subcontractor's claim. Subcontractors' charges and BIFA adjudication are alternative remedies for the same claim and cannot be used in combination for the same amount.

Payment disputes under BIFA have strict time limits. The window for adjudication under the Security of Payment Act can close in 30 business days from the date of the payment schedule. If that window is missed, the statutory option for that claim is lost and the Contractor's remaining options are under the contract only.

FAQs About Construction Contract Payment in Queensland